Mel's Blog

June 20, 2012 Market News

June 20th, 2012 9:17 AM by Mel Samick

Instead of backyard barbecues and beer, this Father's Day saw many investors with their minds on Greece. The Greek election, that is. One thing is almost certain to come from yesterday’s event, and that is more volatility for U.S. stocks. Analysts have viewed the Greek election as a potential turning point for Greece, with all eyes on whether voters will favor the leftist Syriza party opposed to the austerity measures that are part and parcel of Greece's international bailout package, or the conservative New Democracy, which is committed to upholding the terms of that agreement. Central Athens had a rather subdued air on Sunday morning. The previous night, it had been filled with cars tooting their horns and revelers celebrating Greece’s victory over Russia in the European Championships. Fears of an imminent Greek exit from Europe's joint currency receded late Sunday after the conservative New Democracy party came in first in a critical election and pro-bailout parties won enough seats to form a joint government.

If there were any doubts left, this last week’s array of weak economic data hammered the point home; the recovery has stalled and the time has come for the Fed to step up.The Fed may be compelled to act when they huddle up this Tuesday and Wednesday. Consumer sentiment fell in early June to a six-month low on worries about deterioration in the jobs market and Europe's festering debt crisis. Americans downgraded their economic outlook after their confidence improved in May to its highest level since October 2007. Consumer sentiment is seen as a predictor of consumer spending, which accounts for roughly two-thirds of the U.S. economy. Another government report last Thursday pointed to persistent weakness in the labor market as the number of Americans filing new claims for unemployment benefits last week rose for the fifth time in six weeks. Retail sales in the U.S. fell in May for a second month as slower employment and subdued wage gains dampened demand. Additionally, Consumer Prices fell in May by the most in over three years as households paid less for gasoline, possibly giving the Fed more room to help an economy that is showing signs of weakening. Would you like any more uplifting news?

The recent financial crisis has left the median American family in 2010 with no more wealth than they had in the early 1990s, erasing almost two decades of accumulated prosperity, the Federal Reserve said last Monday. The median family, richer than half of the nation’s families and poorer than the other half had a net worth of $77,300 in 2010, down from $126,400 in 2007, the Fed said. The crash of housing prices explained three-quarters of the loss. The survey also found a shift in the reasons that families set aside money, illustrating the lack of confidence that is weighing on the pace of economic growth. More families said they were saving as a precautionary measure, to make sure they had sufficient liquidity to meet short-term needs. Fewer said they were saving for retirement, education or for a down-payment on a home.

You know what would make me feel better? Bacon, Ice cream, Hot fudge, Caramel. All four major food groups are now combined into one perfect treat. Burger King hopes to find out this summer, as it rolls out, for a limited time, the Bacon Sundae. The dessert is really a lure to promote new bacon-related burgers as BK continues to expand its menu and prepares for an IPO. How unhealthy is it? The sundae weighs in at 510 calories, 61 grams of sugar, and 18 grams of fat. Yummy!

Despite the weak economic data, there were some positive signs. A gallon of regular fuel at the pump cost an average $3.71 in May, down from this year’s peak of $3.94 on April 4, according to AAA. It was down to $3.54 last week. On the mortgage front, after holding in lackluster territory for much of the spring season, weekly mortgage applications took a huge jump rising to the highest levels since 2009, signaling that the usual summer slowdown is perhaps holding off. Applications to purchase a home jumped 13 percent week-to-week, according to the Mortgage Bankers Association, while refinance applications surged just over 19 percent. This as the rate on the 30-year fixed mortgage stayed essentially flat at 3.88 percent, up from 3.87 percent.

Stocks gyrated in a wide range all week, alternating between gains and losses of more than 1 percent for most days, in reaction to various headlines from the euro zone. Still, all three major indexes posted gains for the week. The Dow Jones was up 1.7 percent for the week while the S&P 500 was up 1.3 percent and the Nasdaq finished the week up .5 percent.

Much like the stock market last week, I expect we will have a volatile week. The G20 summit begins on Monday. On Tuesday we will receive data on Housing Starts and the FOMC meeting begins. Weekly Mortgage Apps and Jobless Claims will be reported on Wednesday and Thursday respectively.

Mel

Information provided by NYCB Capital Markets

Posted in:General
Posted by Mel Samick on June 20th, 2012 9:17 AM

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