The road to recovery may not be banished any time soon, but this week has offered a few possible stumbling blocks. Housing starts made a surprise move higher – up 17.2 percent from a revised April total. However, confidence among builders has declined and year-over-year numbers show that building is still at the lower end of the overall spectrum. Builders may be looking forward to a boost from first-time homebuyer credits or other incentives, but that kind of hope still has to be marked against the drop in mortgage applications. Those are now at their lowest levels since November. Consumers are still having to contend with the threat of job losses, even though today’s CPI data might be seen as a positive for the average American.
The Consumer Price Index logged a smaller increase than expected, rising 0.1 percent last month. Overall, consumer prices have posted their largest twelve month decline in over half a century, dipping 1.3 percent. While low prices may sound like a good thing, a movement towards deflation could stall production and create additional job woes. This week’s industrial production number may add to overall concerns since U.S. industrial output was down in May.
Drops in automobile, mining, and technology all seem to confirm that the average consumer is putting off certain purchases despite enthusiastic marketing campaigns. Best Buy may have beaten profit expectations, but the first-quarter profits for the electronics retailing giant still fell 15 percent. The president and COO may be looking forward to “when customer demand accelerates”, but how long can retailers hang on?
FedEx was in the latest headlines for a week that seems to be turning market optimism sour. A decline in fourth quarter earnings still beat estimates, but the outlook for the shipping company’s current period is grim. Overall, this week’s trading may bring back some of the uneasiness that appeared to be gone. Ahead of next week’s FOMC meeting, the remaining focus may be on the effect of the presidential drive to reform banks and other financial firms. Uncertainty and change may deliver an increase in volatility levels.
Past Performance is Not Indicative of Future Results.
Past Performance is Not Indicative of Future Results.
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