THE Standard & Poor's 500 Index last week posted its first back-to-back weekly declines since March after the Federal Reserve signaled it may raise interest rates and Lehman Brothers Holdings Inc's US$2.8-billion loss renewed speculation that banks face more writedowns.
The retreat was limited by a 1.5-percent rally last Friday as lower oil tempered concern that price increases will accelerate.
JPMorgan Chase & Co, the third-biggest United States bank, and Wachovia Corp, the fourth-largest, fell during the week after Fed Chairman Ben S. Bernanke said he will "strongly resist" any surge in inflation expectations. Lehman slid 20 percent after raising US$6 billion and replacing two top executives, Bloomberg News reported.
The S&P 500 slipped 0.1 percent to 1,360.03. The Nasdaq Composite Index lost 0.8 percent to 2,454.50, dragged down by a plunge in Yahoo! Inc shares after it ended buyout talks with Microsoft Corp. The Dow Jones Industrial Average added 0.8 percent to 12,307.35 as McDonald's Corp jumped on better-than-estimated May sales.
Pipe dream
"The Fed is finished" cutting interest rates, said George Feiger, chief executive officer of Contango Capital Advisors, which oversees about US$2 billion in Berkeley, California. "There's not going to be a rapid recovery. Expectations of a turnaround in earnings are a pipe dream."
The S&P 500 declined 3.1 percent in the past month amid speculation that central banks will raise borrowing costs to fight surging food and energy prices. Yields on two-year Treasury notes climbed the most in 26 years and the US dollar posted its biggest weekly gain versus the euro since 2005 as traders bet the Fed will lift its key lending rate as early as this month.
Two-year Treasury yields added 0.65 percentage point last week, the most since August 2002, to 3.02 percent. The US currency rose 2.6 percent against the euro.