Stock prices continue downfall
Equity prices rose marginally on Monday but posted sharp declines from Tuesday through Thursday. An uptick on Friday was barely discernible. Consequently, prices once again were down sharply on a weekly basis. Keep in mind that September is classified as the "cruelest" month for the stock market based on historical trends. It is a time when many professional managers clean up their portfolios for the year in anticipation of year-end reviews. In addition to this seasonal turmoil, equity investors are worried about a potential war with Iraq that President Bush insists is necessary. Defense-related companies might perform well in such a case, but wars aren't generally good for stock prices.

Treasuries rally on weak economy and declining stock prices, again
The Treasury market rallied focusing on several indicators that came in on the weak side of expectations. In addition, the stock market faltered during most of the week. This once again led investors to the safe-haven sector of the Treasury market. Some bond investors, encouraged by rate cut forecasts from several Wall Street firms, are still hoping that the Fed will reduce its funds target sometime soon. However, no major firms are predicting that the Fed will cut rates at Tuesday's FOMC meeting. The vast majority of economists are predicting that the Fed's next move is a rate hike - although not until some time in 2003.