stocks to rebound from recent routs

Stocks to rebound from recent routs

Investors are puzzled over new Fed leader's intentions
By Leslie Wines, MarketWatch
Last Update: 9:01 AM ET Jun 7, 2006


NEW YORK (MarketWatch) - U.S. stocks are set for a higher opening Wednesday, as investors seek stocks that have fallen to attractively cheap prices in recent selloffs and grapple to understand the monetary policy signals of the Federal Reserve's new Chairman, Ben Bernanke.
The futures contract for the Dow Jones Industrial Average last was up 12 points at 11,025. Futures contracts for the S&P 500 and the Nasdaq 100 were up 1.90 points at 1,267.50 and up 2.5 points at 1,580.
On Tuesday, stock prices closed off their lows, as inflation worries reinforced feats of further interest rate increases, and recent remarks by Bernanke on slowing growth spurred a gloomy outlook for corporate profits.
The final hour of trade Tuesday saw some buying of stocks that have dropped to attractively cheap levels and that spirit should carry over into Wednesday's opening.
Remarks on Monday by Federal Reserve Chairman Ben Bernanke have left investors convinced that the Fed will lift rates at its monetary policy meeting on June 29, despite the fact that data reports have strongly pointed to an economic slowdown.
"This is a very light week on the economic calendar. That has left the market vulnerable to the Fedspeak," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
Although Bernanke is committed to transparency, investors are unclear about his intentions, a factor which has lent volatility to the stock market. He has said repeatedly that monetary policy decisions will be linked to the strength of economic data reports.
That message left investors convinced that the Fed would have no choice but to pause in its rate tightening program at its June 29 monetary policy meeting last week when data showed that jobs creation was unexpectedly weak last month.
However, on Monday Bernanke, attending a conference with European and Japanese central bankers, seemed to go out of his way to clarify that the Fed will be vigilant on inflation.
That stance suggested to many people that the Fed will keep lifting rates, even if the labor market and other sectors of the economy are slowing down.
The Fed lifted rates a sixteenth consecutive time at its May 10 monetary policy meeting, leaving the fed funds rate at 5%. The policy statement issued at the time was a disappointment to investors because it did not hint at a pause in rate tightenings.