1. Fed Hints At Pause
2. Lunch With Buffett: $620,100
3. Oil Prices Creep Higher
4. Bird Flu Outbreak: $2 Trillion in Losses

1. Fed Hints At Pause

The stock markets cheered the Federal Reserve's quarter-point interest rate hike yesterday. Not because of the rate increase itself - that was widely expected - but because of what the Fed said, or rather didn't say, in its statement about future rate increases.

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"The extent and timing of any additional" rate increases "will depend on the evolution of the outlook for both inflation and economic growth," said the Fed's statement.

The Fed left out a phrase that it used in its May 10 statement, which said "some further" rate increases "may yet be needed."

In other words, the Fed is saying that it is adopting a wait-and-see approach toward any rate decisions. Futures markets reduced odds of an increase at the next Fed meeting to 60 percent from 80 percent, says The Wall Street Journal.

Now, that may or may not be good news for stocks.

Investors sent stocks skyrocketing yesterday, the Dow had its biggest day in more than 3 years and the Nasdaq had its best day in more than 2 years.

David Ader, a strategist at RBS Greenwich Capital, tells the Journal, "The Fed was not as hawkish as investors expected, and we're seeing a ‘relief rally' here."

But the Fed has now placed more emphasis on the latest economic data. Stocks may just face more volatility with every report jerking the market in a different direction.

Just take today's report on personal income from the Commerce Department. The report contains the much-watched inflation indicator, core personal consumptions expenditure (PCE). Core inflation rose 2.1 percent year-over-year, which is above the Fed's comfort zone of 1 percent to 2 percent, according to Economy.com.

The research firm also said that top line prices rose in the month, over 3 percent higher than a year ago.

Stocks were down at the open based on the report's numbers. Stay tuned.

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2. Lunch With Buffett: $620,100

Recently, we told you that a lunch with Warren Buffett was up for auction on eBay. Well, the bidding is over and the winner has been declared.

The winning bid was $620,100, 76 percent higher than last year's winning bid of $351,100. The winning amount was the highest amount that the lunch has ever brought in. Warren Buffett began the auction in 2000.

All proceeds from the auction go to The Glide Foundation, which is a non-profit group that offers food, shelter, and job training for the poor and homeless in San Francisco, says CNN Money.

The lucky lunch guest will be eBay bidder "fastisslow," who hasn't yet revealed his or her identify to the public. Fastisslow beat out "magicyourlife," who pushed the price from $503,000 to $620,000 before fastisslow ultimately outbid him by $100.

Fastisslow, it appears from his eBay history, joined the online bidding site solely for the Buffett auction. All bidders were pre-qualified by a third party before they were allowed to place a bid.

The lunch will be held at New York steakhouse Smith & Wollensky on a date and time agreed upon by Buffett and his guest.

Editor's Note:

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3. Oil Prices Creep Higher

Crude oil futures rose for a fourth day Friday amid concerns about shrinking gasoline stocks ahead of the U.S. Independence Day holiday weekend, when American drivers hit the road.

Light sweet crude for August delivery rose 15 cents to $73.67 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe.

"Earlier in the week, the $73 mark has always been considered the resistance level," said Victor Shum, energy analyst at Purvin & Gertz in Singapore. "Now, we've gone beyond that."

Brent crude futures on the ICE Futures exchange climbed 16 cents to US$73.04 a barrel.

Worries about a supply crunch ahead of the July Fourth holiday grew after the U.S. government released a report Wednesday showing gasoline stocks shrank last week for the first time in more than two months.

Gasoline futures slipped a cent and a half to $2.280 a gallon. Heating oil prices rose nearly a cent to $1.9955 a gallon, while natural gas futures rose nearly 4 cents to $6.173 per 1,000 cubic feet.

Gasoline demand in the U.S. continues to rise in spite of soaring pump prices. Over the past four weeks, daily gasoline demand was up 0.9 percent from a year ago at 9.4 million barrels a day. The average retail price of regular gasoline nationwide is $2.87 per gallon.

About 40.7 million Americans will travel 50 miles or more from home during the July Fourth holiday, up 1.2 percent from 40.2 million last year, according to projections by the AAA, the largest motor club in the United States.

"In the short-term, there's some momentum for pricing to go up further," Shum said. "But as long as the supply situation can be resolved, there'll be a limit to it."

The U.S. Energy Department said in its weekly petroleum report that commercial inventories of crude oil declined last week by 3.4 million barrels to 343.7 million barrels, or 4 percent above year ago levels. Supplies of gasoline shrank by 1 million barrels to 212.4 million barrels, or 2 percent below year ago levels.

The closure of the Calcasieu Ship Channel on the U.S. Gulf Coast had caused prices to rise in the past week. A cleanup is under way following an oil spill at a Citgo Petroleum Corp. refinery in Lake Charles, Louisiana. The channel was partially reopened Wednesday, raising hopes that normal traffic could resume as early as this weekend.

Oil prices are up about 30 percent from a year ago, driven higher by strong demand and a limited supply cushion -- conditions that are worrisome to traders given the backdrop of considerable geopolitical uncertainty, such as violence in Nigeria, the war in Iraq and Iran's diplomatic showdown with the West over its nuclear program.

Iran is OPEC's No. 2 producer of oil, and traders are worried about the outlook for those supplies.

© 2006 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.

Editor's Note:

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4. Bird Flu Outbreak: $2 Trillion in Losses

A severe flu pandemic that kills 70 million people worldwide could lead to global economic losses of $2 trillion, according to a World Bank official.

A drop in tourism, transportation and retail sales, as well as workplace absenteeism and lower productivity resulting from the pandemic, could cause the world economy to shrink by 3.1 percent, said Milan Brahmbhatt, a lead adviser in the East Asia region, citing a study by the World Bank.

The study predicted a surge in corporate bankruptcies in companies with a high level of debt, such as airlines.

Fatalities from the H5N1 avian influenza strain have almost tripled this year, increasing the likelihood of the virus mutating into a lethal pandemic form, Bloomberg.com reports.

Since January at least 54 people have died from H5N1 as the virus spread in wild birds and domestic poultry across Asia, Europe and Africa.

"As these outbreaks continue and spread to new regions, they also increase the probability of a second stage, with human-to-human transmission and a global influenza pandemic, with enormously greater costs on a world scale," Brahmbhatt said in a speech prepared for the First International Conference on Avian Influenza in Humans.

Experts believe that a pandemic in 1918, which killed as many as 50 million people, began when an avian flu virus jumped to people from birds.

The largest economic impact of a pandemic could result not from actual death or sickness, but from the efforts of people to avoid becoming infected, according to Brahmbhatt.

During an outbreak of severe acute respiratory syndrome, or SARS, three years ago, people tried to avoid face-to-face interactions, delivering a sharp blow to tourism, mass transportation, hotels and restaurants.

The World Bank study assumes a 20 percent decline in demand for tourism, transportation and other key services, and a reduction in global GDP of about 2 percent, leading to economic losses of $1.25 trillion to $2 trillion, according to the report.

The Bank's scenario also assumes that about 35 percent of people worldwide would be infected by the virus, and 3 percent of them, or about 70 million people, would die.

Businesses in position to suffer the least financial damage, according to Brahmbhatt, "would be firms with strong balance sheets and capitalization that are more likely to survive steep downturns in demand and cash flow that could last from 6 months up to 2 years."

Editor's Note:

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