March 8th, 2011 9:26 AM by Mel Samick
There was a lot going on last week for investors. If the turmoil in the Middle East wasn't enough, investors were also hit with strong domestic economic indicators and the semi-annual briefing by Mr. Bernanke on economic health. With the situation worsening in Libya, oil prices hit a multi-year high of $105.17 per barrel while Gold traded at $1,441 per ounce. Any negative impact from high commodity prices was offset by a modest economic recovery rate and strong economic indicators. For the week, all of the major indices ended flat. By week's end, the S&P closed at 1,321 while the Dow ended the trading week at 12,169. Health Care lead the market, up +2.4 percent while every other sector remained unchanged with the exception of the financial sector, which was down 1.6 percent.
The economic recovery gained momentum last week as the soft labor market showed a vital sign of improvement in the month of February. Overall, 192,000 new jobs were added to the economy, taking the unemployment rate below 9 percent. To investors' pleasant surprise, the unemployment rate unexpectedly dropped to 8.9 percent from 9.0 percent the previous month. However, Wages and Hourly Work Hours were largely unchanged. In addition, unemployment claims for the week of Feb 26 dipped to 368,000. In other economic news, Personal Income for the month of January was up while Personal Spending was down. With inflation in mind, the core PCE price index was up slightly. However, to increase spending and keep economic growth momentum on track, people need to find themselves back in the workforce and salaries need to rise!
As per the Fed's Beige Book also known as the economic report card, overall economic activity continued to expand at a modest to moderate pace in January and early February. All twelve Fed districts posted improvement in nearly all sectors including manufacturing and retail. Even though the real estate and construction sectors are still at ‘concerned' levels, there were some signs of improvement as some districts reported an increased traffic of potential homebuyers. Also, due to an abundant inventory of existing homes, home prices continue to remain under downside pressure. However, tight lending conditions and higher housing interest rates are making contemplated home buying a relatively unattractive proposition. At the end of the week, the Conforming Fixed 30-year rate leveled out at around 4.81percent, while the Conforming Fixed 15-year rate finished at around 4.17 percent. Standard 5/1 ARM rates were last seen hovering around 3.4 percent.
Information provided by NYCB Capital Markets