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Pros Say: The Next Threat? Inflation (Updated)

Stocks declined, but ended well off their intraday lows on Wednesday after the 10-year Treasury auction, which had a much higher yield than expected. Stocks had opened higher after Home Depot raised its outlook, but those gains quickly faded as the jump in oil prices and sharp rise of lending rates spurred worriesabout key components of the economic recovery. Read and listen to what experts had to say…

No Inflation Fear - Until Recovery

Stephen Moore of the Wall Street Journal Editorial Board said although there is no inflation at the moment, there is “a threat when the economy picks up.” He expects the CPI range to reach 4 to 5 percent by the end of next year.

  • Treasury Holds 'Awful' Auction; 10-Year Yield Hits 3.99%

US an Innovation Laggard?

According to the latest BusinessWeek, innovation in America is on shaky ground. Peter Diamandis of The X Prize Foundation said the U.S. has become risk averse as a nationand his organization challenges innovators by putting up large cash prizes for “a clear, measurable, objective goal.”

Oil Warning: Beware 'Dark Markets'

Senator Maria Cantwell (D-Wash.) said the oil markets need transparency. “We still have 'dark markets' where oil is traded on ice, where consumers don’t know what the real price of oil is being driven by. Consumers deserve an answer and to make sure there aren’t dark markets operating in the United States,” she said.

3 More Years of Market Volatility

“What you need to do is still focus on quality stocks,” said William Skeean of Edge Capital Partners. “Given the fact that [the U.S.] is facing higher inflation…and potentially higher taxes,” investors should prepare for volatility in the marketsover the next three years, he said.

US Bond Market Signals Recovery

“The main reason why [U.S. bond yields] are shooting up is because government bond markets around the world are beginning to factor in the prospect of a recovery,” said Mike Lenhoff of Brewin Dolphin Securities.

Economy in Eye of the Hurricane

According to Simon Rose of Dahlman Rose, the economy is in “the eye of the hurricane.” “We’ve thrown a wall of capital against the problem and unfortunately we’re going to have to pay it back at some point,” he said. While the economy has seen positive effects of the global stimulus, he is worried about inflation and rising interest rates, which will mute the recovery.

Expect Overseas Recovery By Year-End

We’re seeing signs of recovery in the short-term, but there are questions of how strong it may be in terms of job creation and consumer spending, said Bruce McCain of Key Private Bank. He said there will be signs of recovery overseas by year-endwhich should help with overall economic growth.

Markets Entering a ‘Danger Zone’

“I’m constantly shocked at how many investors worship at the altar of price momentum,” said Doug Kass of Seabreeze Partners Management. He said the markets are entering a “danger zone” and the increased likelihood of a double dip in early 2010 in the domestic economy is a concern.

For Oil, The Sky’s the Limit

Crude oil prices recently reached a new high for the year and could get even higher, said independent oil trader Daniel Dicker. “Instead of fundamental reasons for oil to be going higher, there’s a fundamental argument to invest in oil — and that’s what’s driving oil higher,” he said.

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CNBC's Companies in the News:

Microsoft

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Citigroup

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Goldman Sachs

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Bank of America

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