Apr 2004 Financial News

US - Markets Slide, Nortel Faces Disaster

Apr 28, 2004

Stocks fell into a steep slide today because of geopolitical uncertainty and interest rate concerns. The continuing battle in the Iraqi city of Falluja and fears of an economic downturn in China are distracting investors from generally positive earnings reports. In corporate news, Comcast has retracted its $48 billion bid for Disney. Comcast also reported weaker than expected profit and indicated that it might look to buy Adelphia.

One big question now on Wall Street is how much the Federal Reserve will raise rates once it gets started hiking them. A lot of bond market folks are quick to look at the average size of rate hikes in past business cycles as a guide to what happens now, which would mean the fed funds rate could go from its 45-year low of 1% up to about 5%. That would be a move that could push long-term rates a good bit higher too. What will be key for the Fed, however, isn't history but the present. If inflation rises only a little and jobs pick up to normal and the economy grows but doesn't roar, the Fed may figure it doesn't need to raise rates all that much. (source: CNN Money)

The accounting inquiry at Nortel took a shocking twist Wednesday with the firing of CEO Frank Dunn. The Canadian telco equipment giant named William Owens president and chief executive, replacing Dunn, who was "terminated for cause," Nortel said. The news comes as the company continues to probe bookkeeping irregularities that have provoked two restatements in the space of six months. Nortel said it will once again have to restate results for 2001, 2002 and 2003. The stock has lost nearly a third of its value today. (source: The Street)