Markets Still Waiting for a Reason to Believe

Here we go again. Stocks set off on a fair-to-middling rally (by recent standards, anyway) Friday after hearing the fair-to-middling good news about wholesale prices from the Labor Department. The Producer Price Index, a bottom-of-the-food-chain indicator of inflation pressure, was unchanged in May, which was good news for those watching Chairman Greenspan's interest-rate trigger finger; on the other hand, the possibly more reliable "core" rate, which excludes volatile food and energy prices, edged up 0.2 percent. Complicating matters: Prognosticators were agreeably surprised by the first number and slightly disappointed by the second, leaving Wall Street with a slight urge to buy but not a reason to believe.

"Right now, I don't think the Fed will raise again," says TIME senior economics reporter Bernard Baumohl. "But the markets can always find a reason for uncertainty." Indeed, as more and more readings indicate that Cap'n Greenspan's economy is touching down softly and inflation-free, the narrower the range of possibilities in those feverish little investor brains. He could stand pat. He could hike by a quarter-point this month so as to beat election-season, when coaxing up unemployment for the good of the country gets politically tricky. But that'd be about it, and if all's quiet on the Consumer Price Index front next Wednesday, the marketeers might be ready to lock into a slow-boiling, summer-long uptick based on the assumption that Greenspan is finally off their backs. But between now and then? Friday's pleasant rally turns to next week's nail-biting, and though Wednesday should be reassuring, nervousness is a very hard habit for these markets to break.