"YOU AIN'T SEEN NOTHING, YET" When I first started investing I heard those words many times- "Don’t fight the Fed." In light of the bull market in the general markets that phrase generally meant that the Fed can affect interest rates, and interest rates can be very powerful motivators to the markets. Generally that phrase seems to be repeated during stock market bulls, but I guess it certainly also made a lot of sense when Volker raised rates back in the early 80’s, just in the reverse. Still, that phrase seems a bit arcane to me since the Bond markets really set rates with the Fed just confirming them with their official statements. Now, that makes a lot of sense to me since the investors in the Bond markets make their investment decisions based on the environment of the markets. Still, the concept works.
Gulf States May End Dollar Pegs, Kuwait Minister Says Gulf states are considering dropping their pegs to the dollar after the U.S. currency's decline stoked inflation across the region, Kuwaiti Finance Minister Mustafa al- Shimali said. ``Yes, there are some'' Gulf Cooperation Council states considering dropping their pegs to the dollar, which has fallen 13 percent against the euro in the last 12 months, al-Shimali said in an interview in Kuwait late yesterday without naming the countries. ``Some countries will do what we are doing.'' Al-Shimali's comments may restoke speculation of a change in Middle East currency systems that eased after the United Arab Emirates and Qatar last month ruled out any revaluation or dropping the dollar peg in the short term. The issue will remain a key issue as long as inflation remains high.
U.S. initial jobless claims surge 35,000 to 380,000 Erasing the drop reported in the prior week, first-time filings for state unemployment benefits surged 35,000 to 380,000 last week, the Labor Department said Thursday. That level is the highest seen since March. The prior week's claims were revised up by 3,000 to 345,000. The four-week moving average of initial claims fell 6,500 to stand at 363,750. The level of average initial claims is consistent with a weak labor market, wrote John Ryding, chief U.S. economist for Bear Stearns. Economists say claims readings running consistently higher than 350,000 signal significant weakening in the labor market. Claims have been hovering near that level, albeit sometimes falling below it, for a few months now, exacerbating jitters about recession in the U.S. economy. For the week ended April 19, continuing jobless claims rose 74,000 to 3.02 million -- the highest level since April 2004. The four-week average of continuing claims rose 16,750 to 2.98 million, marking the highest level since May 2004 and an indication that displaced workers are having a hard time finding new jobs.
Income gains eroded by inflation in March Higher prices took away all the income gains U.S. households received in March, the Commerce Department estimated Thursday. Consumer prices rose 0.3% during the month, matching the 0.3% rise in incomes that was expected by economists surveyed by MarketWatch. Real disposable incomes were unchanged in March after accounting for taxes and inflation. Real disposable incomes are up 0.9% in the past year. Consumer spending increased 0.4%, or just 0.1% after adjusting for rising prices. Economists expected a 0.3% rise in spending. The report on personal incomes fleshes out monthly details contained in the quarterly report on gross domestic product released on Wednesday. That report showed consumer spending rose at the slowest pace in seven years during the first three months of the year.
Mortgage Applications Drop to 2008 Low Applications for U.S. home mortgages last week slumped to their lowest since December in another sign the housing market is far from recovery, according to data reported by an industry group Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity dropped 11.1 percent to 567.0 in the week ended April 25, its lowest since the week ending Dec. 28. The MBA's index of applications for loan refinancings fell 16.7 percent last week to 1,905.2. The drop in applications follows data Tuesday that showed foreclosure filings more than doubled last quarter from a year earlier, adding to inventories and exacerbating price declines.
Home Depot cuts expansion plans Home Depot Inc., whose sales have been hurt by the declining U.S. housing market, said Thursday that it will slow its new-store growth, abandoning plans to open about 50 U.S. stores in its pipeline to save cash for existing stores. The company also will close 15 underperforming U.S. stores. The world's largest home improvement retailer will take charges totaling $586 million for the actions, most of which will be recognized in the first quarter of fiscal 2008, the Atlanta-based company said. The company will reduce its new store capital spending by about $1 billion over the next three years. It still plans to open 55 new stores this fiscal year, including 36 in the U.S. Beginning in fiscal 2009, it plans to grow square footage by about 1.5% a year. About 1,300 jobs will be affected as a result of the 15 store closings.
White House admits fault on 'Mission Accomplished' banner The White House said Wednesday that President Bush has paid a price for the "Mission Accomplished" banner that was flown in triumph five years ago but later became a symbol of U.S. misjudgments and mistakes in the long and costly war in Iraq. Thursday is the fifth anniversary of Bush's dramatic landing in a Navy jet on an aircraft carrier homebound from the war. The USS Abraham Lincoln had launched thousands of airstrikes on Iraq. "Major combat operations in Iraq have ended," Bush said at the time. "The battle of Iraq is one victory in a war on terror that began on Sept. 11, 2001, and still goes on." The "Mission Accomplished" banner was prominently displayed above him - a move the White House came to regret as the display was mocked and became a source of controversy.
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