It’s best to start with the big-time trends, so here it is: there was surprising stability in the markets this past week. Sure, companies are still experiencing colossal write-downs and credit is still notably tight. However, both the stock and bond markets have been comparably quiet, barring one substantial drop on the Dow mid-last week. This is not to say that the markets are “calm”, just “calmer”. The alarmist view seems to be giving way to a begrudging acceptance of modern circumstance as poor, but not exÂplosively bad.
However, lots of fun stuff still happened. Here’s the blow-by-blow:
Martin Feldstein, president of the Bureau of Economic Research stated openly last week that he beÂlieved our country was already in a recession (experiencing negative growth). This is a big blow against consumer confidence, which tends to clam up on word of bad news from a trusted official. Whether he’s right or wrong, the economy certainly FEELS recessionary.
Median home prices locally (the Greater Orlando area) dropped 1.35% month-over-month in March, showing a 8.33% drop from March of last year. Not thrilling, but not horrible either.
Last week brought us the G7 Financial Summit, where financial leaders from around the world get together to strategize and share ideas. A major topic of conversation was trying to stop the decline in the dollar’s value, which no one internationally seemed to inclined to worry about. A weak dollar can decrease deficits owed to us, which is fine by them. Looks like we’re on our own to strengthen our currency.
National pending home sales contracts, a leading indicator for national home sales, fell to it’s lowest level last month since realtors started recording it in 2001.
Former Fed chairman Paul Volcker announced that he is concerned about food and gas inflation drivÂing prices up across all consumer goods. The threat for serious inflation is looming on the horizon if Ben Bernanke and his crew repeat the mistakes of Fed Chairman Greenspan by leaving benchmark interest rates too low for too long in this recovery process. That’s how bubbles are made.
Maybe it’s just me, but I’ve been noticing a lot more talk about company acquisitions and mergers as of late. It seems industries are forcing consolidation in these meager times, despite the relative abÂsence of risky credit providers. With Blockbuster bidding to purchase Circuit City, Microsoft trying to acquire Yahoo, and Delta and Northwest now aligning forces, it seems that Wall Street is determined to press forward regardless of economic circumstance.
Last week, General Electric took a one-day 11% stock hit when they failed to meet projected earnings. The CEO went on television and stated that mistakes were made internally, though the credit markets were making things difficult. GE mainly suffered from it’s floundering financial services division and it’s inability to liquidate assets and businesses (as is normal right before earning season) due to a lack of buyers in the open market. General Electric is viewed by many as a central pillar of our economy, so worries rose when the goliath stumbled.
In separate but related news, Wachovia posted a quarterly loss and worsened projections for future quarters, indicating to many that a bottom to this financial market collapse is still a ways off.
So, what does all the bad news mean? No end in sight to this economic downturn. Newscasters love to interview every Tom, Dick, and Harry and ask if an end is right around the corner. It’s not. Get over it. Investors seem to be adapting to the economic volatility and are easing back into a more norÂmalized pattern of trading. With this, we will see less wild swings in the market indexes. God willing, we’ll see more predictability along with it.
Mortgage bonds have been trading in a very thin range for the past two weeks, indicating that the marÂket is waiting for some sure direction before moving decidedly higher or lower. If inflation measures continue to steadily increase, mortgage rates will be forced to increase as well.