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Former U.S. Federal Reserve Chairman Alan Greenspan stepped back into the spotlight in dramatic fashion yesterday, warning at a business conference that the U.S. economy is in danger of slipping into recession. He categorized the budget deficit as "a very significant concern" and suggested the expansion of the economy since 2001 is approaching a conclusion. He identified the stabilization of profit margins as an indicator that "we are in the later stages of a cycle" and said a recession is possible toward the end of this year. After Greenspan's comments, July fed funds futures were up 0.02 at 94.805, their highest level since Jan. 16, implying 22% odds that the Fed will lower its interest rate benchmark to 5% from 5.25% at its June policy meeting. April fed fund futures were up 0.01 at 94.76, implying a 4% chance the Fed might cut rates at its March meeting. The yield on the 10-year Treasury note was down 0.041 percentage points at 4.637%, its lowest point since Jan. 5.

Sources: Fox News, MarketWatch, Wall Street Journal
Commentary: When Greenspan Forecasts Recession, Is It Time to Switch Camps?Not in Kansas Anymore: Recession, Economic Data and Margin Rules - Oh My!Economists Expect Fed to Sit Tight on Rates Throughout 2007
ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG)

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Source: Greenspan: Recession Possible by End of 2007