1. CNBC Anchor's Remarks Douse Market Hopes

How can a casual conversation at a Washington dinner party turn the stock market picture upside-down?

It can when the conversation is between CNBC anchor Maria Bartiromo and Federal Reserve Chairman Ben Bernanke.

According to Bartiromo, she sidled up next to Bernanke at the annual White House Correspondents Dinner on Saturday night.

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She said that Bernanke told her that he had not intended the markets to infer that the Fed was nearly done raising interest rates.

"I asked him whether the markets got it right after his congressional testimony and he said, flatly, no," Bartiromo said on-air during a CNBC report from the floor of the Chicago Mercantile Exchange.

According to a report Tuesday on Yahoo News: "The resulting trading roar almost drowned out the rest of her remarks."

Positive economic data had fueled a run-up in stocks on Monday until Bartiromo's comments hit the markets. But stocks turned lower in late-afternoon trading after she said the Fed chief told her that the media and the markets had misinterpreted his words last week as a signal that the central bank would pause after one more rate hike.

"Apparently, the market was caught by surprise after Bernanke said his dovish interest-rate comments were misinterpreted by the media," James Park, managing director at Rodman & Renshaw, told CBS MarketWatch on Tuesday morning.

Traders had been buoyed last Thursday after Bernanke told the Congressional Joint Economic Committee that the Federal Open Market Committee would step back and re-examine the impact of its 15 consecutive interest rate hikes over the past 22 months, which raised the federal funds rate from a 40-year low of 1% to its current 4.75%.

While Bernanke did say that rate hikes weren't out of the question, the minutes released last week from March's Federal Reserve Open Markets Committee meeting indicated that the rationale for raising rates was disappointing and that an end to such hikes was probable.

But Bartiromo told her CNBC audience that Bernanke told her that his remarks had been "misunderstood" by investors.

"He said he and his Open Market Committee members were basically trying to create some flexibility for the Federal Reserve, saying the Fed may pause, but the data will really dictate whether more rate hikes will occur."

As a result, the S&P 500 fell 0.7% and the Nasdaq composite lost almost 0.9%. In addition, traders and analysts were growling that Bernanke had better learn how to get his message across to the markets - before he causes some real damage.

"It comes off as a great example of over-communication and a possible attempt to over-fine-tune, assuming he was willing to go on the record with these comments - CNBC is not the Fed's obvious port of call to correct market expectations," Alan Ruskin, strategist at RBS Greenwich Capital, told Yahoo News.

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2. Dollar Sinks on Eurozone Strength

While European bourses celebrated the May public holiday Monday, the U.S. dollar started the week on a seriously weak note.

Late in the New York session, the dollar was thrown a life-preserver when the Federal Reserve took the unusual step of conveying the opinion that the press had misinterpreted comments made in a weekend interview.

However, European traders got back to their desks and reaffirmed the dollar's slide in Tuesday trading on the heels of solid economic data for the UK and Eurozone. Most expect the European Central Bank to take a hawkish stance at its coming rate-setting meeting. 

The release of April's manufacturing Purchasing Managers' Index (PMI) rose to 54.1, as the British sterling soared to its highest level since November 2004. Any number over 50 indicates expansion.

It had seemed that the off-the-cuff comments from Fed Chairman Bernanke to CNBC's Maria Bartiromo (mentioned in the previous article) - coupled with strong U.S. manufacturing, personal income data and inflation - seemed to help the greenback.

But, according to the Financial Times: "… the dollar lost traction on Tuesday, falling back 0.7 cents to $1.2643 against the euro and 1.15 cents to $1.8351 against sterling, although it was little changed at Y113.55 against the yen. The dollar also fell 0.7 cents to a new 28-year-low of C$1.1073 against the Canadian dollar, with the latter buoyed by high oil prices."

"Expectations of an imminent Fed pause, contrasting predictions of tighter monetary policy from the ECB and the Bank of Japan, has been the main reason behind the dollar's slump on the foreign exchange markets in recent weeks," according to Forbes.

"Though other factors, such as the U.S. current account deficit and worries over Iran's nuclear stance, have negatively impacted on the U.S. currency too.

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3. Social Security, Medicare Soon Depleted?

The trustees of the U.S. Social Security and Medicare plans forecast that the Social Security trust fund will be exhausted in 2040, while the Medicare trust fund will be depleted in 2018 - slightly sooner than previously forecast.

The estimates, included in the trustee's 2006 annual report, have been scaled back from 2005's report, which stated that the Social Security trust fund would be insolvent by 2041, while Medicare's would expire in 2020.

The report uses the term "trust fund exhaustion," which implies that the money will completely run out - but that is not exactly the case. What it does mean is that that the system will be able to pay out only a percentage of promised benefits.

"By 2040, for instance, the trustees estimate Social Security will be able to pay out only 74% of benefits currently promised," says a report in CNN Money this morning. "By 2018, Medicare will be able to pay out 80% of estimated expenditures."

Still, there's little doubt that dark clouds are gathering over America's two most popular government payout programs.

In another section of the report, the trustees say that by 2017, Social Security will no longer be taking in enough payroll tax to pay all promised benefits and will need to tap the special-issue bonds that make up its trust fund.

"In order to make good on repaying those bonds, the federal government will have to borrow more money, raise taxes, cut spending elsewhere or reduce benefits," says the report.

The news is worse concerning Medicare, which, starting this year, is expected to pay out more in benefits than it receives in tax revenue.

The trustees estimate that the long-term shortfall of Social Security over the next 75 years will be $4.6 trillion.

CNN asserts that the answer to the shortfall is not private accounts, which proponents say would alleviate government entitlement shortfalls by allowing participants to achieve greater investment returns in the financial markets.

"While the $4.7 trillion is a big number, it's easier to understand the scope of the shortfall this way: In order to keep Social Security solvent over the next 75 years, the payroll tax for Social Security - currently 12.4% - would need to be increased by 2.02 percentage points," the news service reports.

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4. Bolivia Nationalizes, Seizes Its Gas Fields

On Monday, Bolivian President Evo Morales announced that he had ordered the military to take over the country's natural gas fields, threatening to force out any foreign oil firms refusing to accept his mandate.

The leader claimed the move was meant to boost the economy and create more jobs for the country's citizens.

Experts believe that while the immediate impact is weighing on shares in companies directly active in the South American nation, the long-term impact on foreign shares would be minimal.

Meanwhile, the U.S. government and American energy interests were weighing their options.

According to Forbes, ExxonMobil spokesman Bob Davis said, "It is too premature to make a statement. We are monitoring the situation and we'll see what the developments are."

"ExxonMobil has a stake of 34% in Bolivia's Itau natural-gas reserves, a non-producing field operated by Total of France in which the UK's BG Group is also a partner," says Forbes.   

"This underscores the uncertainty we are seeing in the world market. It is one more in a series of factors underscoring the need for more domestic (US) energy production," a spokesman for the American Petroleum Institute said.
 
Says Forbes: "Bolivia has the second-highest natural gas reserves in Latin America, behind Venezuela, with an estimated 54 trillion cubic feet of natural gas reserves. But it is a relatively minor player in crude oil.'

The takeover will most likely affect around 20 foreign energy companies. 

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