June 2nd, 2010 9:44 AM by Mel Samick
Last week was yet another roller-coaster ride for the financial world. Investors were looking everywhere for present and future risk. After Greece, it was Spain that surprised the financial world when Spain's government took over several community banks. By week's end, Fitch downgraded Spain's credit rating from AAA to AA Plus. However, to prevent things from getting worse, Spain's parliament already passed an austerity package to reduce an already oversized deficit and government spending. Investors received a big boost from China when it assured that the Euro will in fact be part of its diversified foreign reserve.
BP's failed "TopKill "experiment was in the news for much of last week. With the live feed of the process available through robotic submarines, people from across the nation were watching with the hope that there would be an end to this slimy affair, but alas, success was muted. With nearly 20 million gallons of oil having already gushed out into the Gulf, the U.S. is facing possibly the greatest environmental disaster in its history. With hurricane season officially starting soon, it will only get worse as government and BP efforts are doing little to reassure nervous mankind.
There were some positive indicators on the domestic front, although they were eclipsed by an ongoing global crisis. For the month of April, Personal Income rose by a strong .4 percent, increasing for the second straight month, while wages and salaries also rose by the same magnitude. However, Personal Spending was flat after increasing for the last two months. At the same time, Consumer Confidence also jumped by 6 points, which is an indicator that consumers are optimistic about the economic recovery. The revised GDP was lowered to 3 percent due to over-forecasted inventory growth. The stock-market reacted accordingly to the news and by the end of the week, all major indices recovered their weekly losses and ended up near break-even. At week's end, the S& P ended at 1089, a .2 percent positive change after hitting a 4.4 percent intraweek low. For the month, the S&P is down by 8.2%, its worst performance in more than one year.
April proved to be one of the best months for the troubled housing sector. Existing Home sales jumped by 7.6% for the month of April, after rising by 7% in March. Though unsold inventory also rose a bit, it was mainly due to more homes coming onto the market ready to take advantage of favorable market conditions. Even New Home sales witnessed a massive jump of nearly 15% from the month of April, providing a much needed boost for construction, lumber and other related industries. However, April was the last month for the Government homebuyers credit which means housing indicators over the next few months will give a clearer picture of the long-term health of the housing sector. With Treasuries in demand, mortgage rates are flirting near all-time lows. The Conforming 5/1 Hybrid ARM rate was around 3.71 percent, while the Conforming Fixed 30 year rate was around 4.77 percent at week's end.
Information provided by AMtrust Bank’s Capital Markets