Struggling Wall Street braces for new message from Fed

NEW YORK, June 21, 2008 (AFP) – Whipsawed by fresh worries on the financial sector, Wall Street enters the summer season with investors in a sour mood ahead of a meeting of increasingly hawkish Federal Reserve policymakers.

Market jitters have risen amid high oil prices, troubles in the banking sector and the prospect of higher interest rates despite soft economic conditions. Auto sector troubles also have intensified.

In the week to Friday, the blue-chip Dow Jones Industrial Average skidded 3.77 percent to end at 11,842.69, closing below 12,000 for the first time since March.

The Standard & Poor’s 500 broad-market slumped 3.10 percent to 1,317.93 and the tech-heavy Nasdaq composite fell 1.97 percent on the week to 2,406.09.

Sentiment faces yet another test in the coming week, when the Federal Open Market Committee headed by Fed chief Ben Bernanke is expected to signal a tougher position on inflation that could eventually mean higher interest rates.

“All eyes will be on the FOMC which is slated to announce its latest policy decision on Wednesday,” said Meny Grauman, economist at CIBC World Markets.

“The markets seem convinced that the Fed will hold rates at 2.00 percent, but there is considerab