Mel's Blog

May 11, 2011 Market News

May 11th, 2011 9:26 AM by Mel Samick

According to a recent CNN survey, 38 percent of respondents believe that unemployment is the most important issue in the current economic situation, followed by 28 percent citing the budget deficit and 21 percent concerned over rising gas prices. The survey suggests that 80 percent of Americans consider the economy to be in bad shape and more than half (55%) think that former president George W. Bush and the Republicans are responsible for it, while only 33% put the onus on the current president and administration. The most important take away message from this survey: the upcoming presidential election is just over a year ahead, more to come soon.

Despite the healthy payroll growth and regardless of market consensus, the unemployment rate, reported a day after the disappointing weekly report on new jobless claims, came back into 'nine-ish' range after last month's break-through down to 8.8 percent. Hourly earnings have not grown much, only 0.1%. The report, however, was positively accepted by the markets. A slight increase in unemployment was easily brightened by the steady rising payroll for the past few months at a rate of above two hundred thousand jobs. While applications for unemployment and unemployment rate could be biased by the processing delays and technicalities around eligibility for unemployment benefits, added payroll counts may be a more reliable indicator of the direction the job market is heading down.

The world economy has just survived two asset bubbles during the decade, yet another one might be knocking on the door. The speculations about the nature of precious metal prices growth shaped into clear concerns as silver prices dove almost 30% last week after they'd reached a 31-year high the previous Friday. The spillover effects reached the gold and copper markets without catastrophic declines. The reports of famous investors, such as George Soros, dumping silver extended the sell-off.

Greece is once again in the news related to EU woes on the huge gap in the economic standing of its members. Two contradictory reports were in the news on Friday. The well known German magazine, "Spiegel", published information on Greece considering the possibility of exiting the Eurozone. Greek and other European Union officials rejected the report and German government officials stressed that the report had absolutely no grounds. Greece is certainly not the only problem the EU is currently facing. The bailout of Portugal is currently being arranged with much opposition expected from Finland. The Eurozone has grown since 1999 from 11 member countries to 17; therefore, it is still not clear how viable the currency union is of such an economically diverse community, or for whom and how beneficial it is.

The ISM Manufacturing Index, the measure of the manufacturing activities was reported at 60.4, slightly lower than 61.2 in the previous month, however still above expectations. The corresponding non-manufacturing index declined unexpectedly, showing a significant slow down in orders and business activities in the sector. Following, the Factory Orders report recorded a strong 3 percent growth, well above the estimate of 2 percent and prior month decline of 0.1 percent, hinting at nice forward-looking projections. The Productivity and Costs report disappointed in both parts; productivity growth of 1.6 percent was about half of the estimate, and labor costs were up more than expected at 1 percent.

Construction Spending increased slightly by 1.4 percent in March after a 2.4 percent decline in February, still beating the forecast of a 0.5 percent gain built upon the expectations of anemic market conditions this season. Both months' readings were about seven percent lower than corresponding numbers in the same months of the previous year.

Domestic Motor Vehicle Sales of 10.1 million units annualized were up slightly from the previous month's reading. Total sales changed little, marking no dramatic shift in the mix of domestic and imported car sales despite supply problems in Japan. Japanese automakers struggled to restore production as soon as possible and we may now see photographs of Nissan cars being checked for radioactive contamination before being loaded aboard ships in Japanese ports.

 

Mel  Samick

Information provided by NYCB Capital Markets

Posted in:General
Posted by Mel Samick on May 11th, 2011 9:26 AM

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