Mel's Blog

August 3,2011 Market News

August 3rd, 2011 9:23 AM by Mel Samick

There was good news and bad news last week. The good news: An agreement had been reached. The bad news: The agreement was between the NFL owners and players - not the nation's leaders regarding the debt ceiling. I'm glad that the NFL owners & players were reasonable We will be watching professional football this fall. Now, if only the President and Congress could be that responsible and end the nonsense around the debt ceiling. We were once again promised hope of an agreement late Sunday, but, it will take politicians from the extreme sides of the political spectrum to agree to a plan. As for the members of Congress that are not willing to compromise, they should consider resigning and be forced to enroll in a high school level economics and financial management class.

While final debt ceiling votes are bought and sold on The Hill today, the markets are on a roller-coast ride. A general nervousness around the outcome of the debt talks underscores good news and exaggerates the bad. There was a mix of good and bad news last week. U.S. Home prices rose 1 percent in May. Many experts feel that this increase was due to the stronger demand for houses during the summer months. While this marked the second consecutive increase, house prices are still down 4.5 percent over the last 12 months. Sales of new single-family homes were down 1 percent in June. At the current pace, there is a 6.3 month supply of new homes. The median sales price rose 5.8% to $235,000.

Consumer confidence was also up from 57.6 to 59.5 in July. This came as a surprise since market analysts believed that the number was going to slip by 2 pts. The Conference Board said that there are more consumers that are expecting jobs to open and incomes to rise in the coming months. However, this contrasts the report released by the University of Michigan survey. The Conference Board is looking more at the labor market while Michigan's report focuses more on the financial markets.

Durable goods orders, which have been very inconsistent this year, dropped 2.1% in June. The drop, as well as the inconsistency, is primarily due to the transportation part of the data. If you take out the orders for autos and airplanes, there was a slight increase in durable-goods, .1 percent. Shipments of durable-goods increased .5 percent for the second straight month. Inventories were up .4 percent and orders for computer equipment were up 15.2 percent. Shipments of core capital goods increased 1 percent in June.

The Federal Reserve released its Beige Book on Wednesday. In it, the Fed reported that the problems in the labor market and with real estate offsets a slight increase in consumer spending. It goes on to say that growth has slowed in many districts.

An encouraging sign, though, came on Thursday. Requests for jobless benefits dropped to 398,000 from 422,000 two weeks ago. The four week average also dropped 8,500 to 413,750.

In other reports, the Employment Cost Index was up .7 percent, according to the Labor Department. Wages and salaries were up slightly, .4 percent from April - June. The Chicago PMI was down to 58.8 in July from 61.1 in June. The Commerce Department reported that annualized GDP was reflected at 1.3 percent; but, many expected this number to be 1.8 percent. The government also said that the recession was deeper than initially projected.

Today, we should see an agreement on the debt ceiling and we have the releases of the ISM report and Construction Spending. Personal Income, Consumer Spending, and the Core PCE Index is released on Tuesday. Wednesday is the ADP Employment Report, ISM Non-manufacturing, and Factory Orders. On Thursday, Jobless Claims and the first Friday of the month, as always, brings the release of Nonfarm Payrolls, the Unemployment Rate, Consumer Credit, and Average Hourly Earnings.

Mel

Information Provided by NYCB Capital Markets

Posted in:General
Posted by Mel Samick on August 3rd, 2011 9:23 AM

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