March 15th, 2011 9:28 AM by Mel Samick
The markets remain focused on the unrest in the Middle East and Northern Africa. This week saw more unrest in Oman, Iran, and Iraq. Demonstrators were busy in Oman. On Tuesday, they tried to block a strategic road leading to the industrial port town of Sohar. Later in the week, they set fire to a police station and two government office buildings. Oman produces about one percent of the world's oil supply. They supply oil mostly for China and Japan. In Libya, Ghadafi continues to fight for his life. It seems to have been a better week for the embattled leader as his forces claimed back important territories and key oil fields. The pro-Ghadafi forces were able to regain control of Zawiya, a key city because of its proximity to the capital city of Tripoli. In other parts of the Middle East, rebels bombed Iraq's largest oil refinery. Police in Saudi Arabia opened fire on Protestors on Thursday. Because of all the turmoil, oil prices have soared. At one point, oil was as high as $110/barrel. At week's end, oil closed just above $100/barrel.
Friday was a volatile day for the markets. Most of us awoke to news of a devastating 8.9 magnitude earthquake in Japan followed by a Tsunami which at current count has seemingly wiped out at least 10,000 lives. Our thoughts and prayers are with the Japanese people. The initial news led to Treasury prices rising and stock futures heading downwards. That reversed throughout the day. Stocks advanced on gains from fuel, metal, and industrial companies. Also helping was a report that showed that retail sales increased in February.
Retail sales need to remain strong as the trade deficit widened 15.1% in January. The trade deficit along with an increase in Chinese exports has raised concerns as to whether the economic recovery has slowed. The price of oil along with the increase in imports of autos, consumer and capital goods all had a part in widening the trade gap.
Consumer borrowing has increased at a pace of 2.5% annually in January. Consumer credit has increased for the fourth consecutive month. There was a 7 percent increase in non-revolving credit, including loans for cars, boats, and education.
It was a bad week for foreign bonds. Moody's lowered the Greek Debt rating three steps to B1 on Monday. This led to higher yields on both Greek & Portuguese 10-year bonds. Irish 10-year bonds also hit their highest level since before the creation of the EU. European leaders will meet later this month to create a detailed plan to attempt to solve the region's debt crisis.
Back home, CoreLogic reported that the number of mortgages underwater jumped to 11.1 million in the fourth quarter, or 23% of all mortgages. This is up from 10.1 million in the third quarter or 22.5%. Negative equity is preventing people from being able to move, sell, or refinance their homes. However, Mortgage Applications, according to the MBA, were at the highest point in three months last week. Purchase-loan demand increased 12.5 percent, while refinancing requests climbed 17.2 percent. The MBA cites an improving job market as the biggest reason for the increase. According to the Manpower Employment Outlook survey, employers' hiring plans are slightly higher than they were a year ago.
On Wednesday, Forbes released the list of World's Billionaires. Where did you fall on the list? There are more billionaires then ever (1,210) with the most combined wealth ($4.5 trillion) since the 25 years Forbes has published the list. Carlos Slim, the Mexican Telecom mogul, led the list. Bill Gates and Warren Buffett were 2 and 3, respectively.
This week marks the beginning of March Madness. Thursday will be a day of difficult decisions. Thursday is not only the beginning of the NCAA basketball tournament, but it is also St. Patrick's Day (I would suggest taking Notre Dame for the first round at least). Not only will you have to choose Ohio State or Kansas to win the tourney, but, you'll also have to decide whether to go to the big parade or your favorite sports bar. Whichever you choose, sit back, have a big dish of corned beef and cabbage, drink a green beer and watch all the excitement unfold.
The week ahead we have the FOMC statement on Tuesday, Housing starts and the Producer Price Index on Wednesday. On Thursday, Jobless claims, the Consumer Price Index, Core CPI, and Leading Indicators will be released.
Information provided by NYCB Capital Markets