Review of Last Week
DEBT WORRIES WOBBLE STOCKS...The word of the week was "debt" as investors worried about both Italy's sovereign debt problems and the inability of the politicians in Washington to get to agreement on raising the U.S. debt ceiling. With these uncertainties, stocks wobbled off their high perch and all three indexes sank for the week, the broad-based S&P 500 down 2%.
The FOMC Minutes from the Fed's last meeting revealed a divided committee. Some officials feel the central bank "might have to consider providing additional monetary stimulus" if the recovery remains slow. Others think inflation threats could cause them "to begin removing policy accommodation sooner." Tracking inflation, the June Core Consumer Price Index (CPI) was up a little more than expected, but consumers weren't that put off, as June Retail Sales were up a tick for the month and up 8.1% from a year ago.
For the week, the Dow ended down 1.4%, to 12480; the S&P 500 was down 2.1%, to 1316; and the Nasdaq was down 2.4%, to 2790.
European debt worries and disappointing economic news sent investors to the safe haven of the bond market. Successful Treasury auctions showed these folks weren't worried about U.S. debt. The FNMA 4.0% bond we follow ended the week UP .09, at $100.28. National average rates on fixed-rate mortgages, according to Freddie Mac's weekly survey, are at or near lows for the year.
DID YOU KNOW?...The Federal Open Market Committee (FOMC) has 19 members, including seven Federal Reserve board members in Washington and 12 regional Fed bank presidents. Two Fed board seats are currently vacant.
>> This Week's Forecast
HOME BUILDING, HOME SELLING EDGING UP...Tuesday's June Housing Starts are forecast up slightly from last month, although still not near pre-downturn levels. Building Permits, foreshadowing starts a few months out, are expected to be flat. Wednesday, June Existing Home Sales should also be up, but not quite back to the 5 million annual rate.
Weekly Initial Unemployment Claims are predicted to remain above 400,000. The Philadelphia Fed Index should show manufacturing in that region improved over last month. Finally, the June Leading Economic Indicators Index is expected to be up for the month, though at a lower rate than before.
>> The Week's Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
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