June 5th, 2013 9:43 AM by Mel Samick
The IRS got unlucky when they were tangled in a now infamous tax scandal, where the tax agency seemed to have inappropriately targeted conservative political groups. In addition to the IRS uproar, the White House has been dogged in recent days by continuing questions about last September's terrorist attack in Benghazi, Libya and the Justice Department's seizure of the phone records of Associated Press journalists as part of a criminal investigation.
The stock markets, on the other hand, seem to be getting lucky with every passing week. Stocks capped off another strong week with a broad rally, and the dollar extended its gains, as a bigger-than-expected rise in Consumer Sentiment bolstered the view of an economy that is faring better than some had expected. The Dow Jones Industrial Average climbed 121 points, or 0.8 percent, to 15,354, on Friday. Europe's faltering news didn't help the cause though. It remains one of the weaker economic regions, with the Eurozone economy contracting by 0.2 percent. This is the sixth consecutive quarter of contraction for the Eurozone. France was the new entrant to the long list of Eurozone countries in recession, with its GDP falling by 0.2 percent in the first quarter of 2013.
In other economic indicators, both producer and consumer prices tumbled significantly in April, with gasoline and food costs moving lower. The benign inflation data occurred against the backdrop of an unexpected drop in U.S. factory output and manufacturing activity. Initial Claims for state unemployment benefits jumped by 32,000 to a seasonally adjusted 360,000, the biggest jump since November. In the housing sector, Housing Starts notably disappointed but Housing Permits were unexpectedly optimistic. In April, housing starts plunged a monthly 16.5 percent after rising 5.4 percent in March.
Treasuries fell again in the longest losing streak this year as the economy showed more signs of strength, prompting speculation that the Federal Reserve may start to slow the pace of its monetary stimulus. U.S. 10-year yields rose five basis points this week, to 1.95 percent. There are reports that the Federal Reserve is preparing a strategy to wind down asset purchases, currently totaling $85 billion a month. The investment-grade corporate bond market was mixed. The lower-quality bonds with higher coupons and shorter durations continued to attract investors concerned about rising interest rates.
Information provided by NYCB Capital Markets