On February 13, the highlight was last month's Retail Sales report with an unexpected +0.3% The surprise was due to the fact that traders were almost counting on a -0.3%. Excluding the automobile sales, we get 0.3% that also turned out to be better than the expected 0.2%. It just makes sense that February could have been a slow month, because as we go through changes in the economy we become more cautious about spending and some times before making additional purchase decisions we wait for income tax refunds to pay off credit card debt incurred during the holidays.
On Valentine's day a report showed 348,000 Jobless Claims (Initial) for February 9, 2008, which in spite of the loss of employment in different sectors was below expectations of 360,000.
Right after the most romantic day of the year here we started with the often volatile NY Empire State index, which is a regional manufacturing report showing a surprise reading of -11.7 versus forecasts for a positive reading of 7. Please not that any negative reading suggests contraction in the sector.
Another report, the University of Michigan's February consumer sentiment index, showed a bigger-than-forecast dip to 69.6 from 78.4 in the previous month. Economists thought it would fall to 76.5.
A third report showed a slight tick up in industrial production and flat capacity utilization in January. The experts are saying,"the combination of rising utilization and a falling unemployment rate pose issues for the Fed's outlook for inflation pressures,"
The last, but not least Consumer Sentiment Index (UoM) report for the month of Feb dropped at 69.6. It is necessary to notice this mid-February level, because represents the lowest since February 1992 while the expectations were 76.5.
The main feature was the investors'reaction after the Congressional testimony of the Federal Reserve Chairman Ben Bernanke, who underlined that the economic conditions are likely to get worse before they get better.
What's all this?
Many families see and feel inflation on the rise as housing problems, coupled with higher energy and food prices are tamping consumers' outlook, according to results from recent surveys. I hope you're getting used to this roller coaster ride, because volatility in the market place has been incredible, especially with mortgage bonds trading sharply lower because of the fear of inflation. While the general public still believes that mortgage rates will continue to go down thanks to the Fed cuts, we need to tell them that interest rates change sometimes hourly. I don't know if you have online access to rate sheets, but I have been getting re-prices for the worse on a daily basis for the past couple of weeks.