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June 1, 2010
 Now It Is Korea
Want to take the pressure off a crisis? The fastest method is to find another crisis. Well, the tensions between North and South Korea have escalated to the point that the market swings last week were accompanied by commentary on how important the strong Asian economies are, with less focus upon Europe. Growth in Asia has been an important factor in helping our country and the world begin our economic recovery. Even the rebound experienced on Thursday was fueled by comments from China. Again, we would like to point out that it is actually good news that the markets are focused upon negative events around the world rather than our own economy. Does this mean that our economy is out of the woods? Not by any means.
The recent economic news has been positive. Orders for durable goods and housing starts were higher than expected. However, everyone realizes that the housing data was pumped up by the end of the tax credit. In addition, the economic growth figures for the first quarter were revised downward slightly, personal spending was flat and weekly jobless claims are not continuing to improve. This means that the economy is growing, but not strongly enough to bring down the unemployment numbers sharply. The good news is that a moderate recovery should continue to keep rates low. All eyes will be focused upon the employment numbers to be released Friday as an important indication as to just how strong this recovery is shaping up to be.
 If one looks at the week-to-week comparison of the markets from Friday, May 21 to Friday, May 28, one could conclude that it was a quiet week with the closing S&P virtually the same. However, this snapshot would mask the volatile swings that occurred from day-to-day. The Dow ended down 7.9% for May, its biggest monthly drop since February 2009. The measure also snapped a three-month winning streak and set its worst percentage performance for May since 1940. With traders returning after a holiday weekend, there is potential for more volatility in the coming week, especially because there will be important economic releases such as the employment report, factory orders and construction spending crammed into a shortened week. Source: Wall Street Journal On-Line
Current Financial Indices
Updated May 28, 2010
| |
Daily Value |
Previous Week |
|
May 28 |
May 21 |
| 30-Year Mortgages |
4.78% |
4.84% |
| 1-year Treasury Security |
0.37% |
0.34% |
| 10-year Treasury Security |
3.30% |
3.20% |
| Dow Jones Industrials |
10,137 |
10,193 |
| S&P 500 |
1,089 |
1,088 |
| Euro To US Dollar |
1.230 |
1.259 |
| Oil: US Light Crude |
73.37/bl |
70.04/bl |
| Gold |
1,210/oz |
1,176/oz |
| Prime Rate |
3.25% |
3.25% |
 Economists forecast the pace of U.S. growth to pick up in the year ahead as consumers and businesses alike accelerate spending, according to a new survey. The assessment by leading forecasters was released by The National Association for Business Economics. It finds them more bullish than when the survey was last surveyed in February, with a majority expecting the economy's performance to exceed the long-term norm in 2010 and 2011. The outlook amounts to an encouraging report card on the economy at nearly the one-year mark of the recovery, which the experts date to June 2009 when the recession hit bottom. "Although risks involving Europe have recently escalated, the outlook in this country has improved in most respects," said Lynn Reaser, the group's president and chief economist at Point Loma Nazarene University. "Growth prospects are stronger, unemployment and inflation are lower, and worries relating to consumer retrenchment and domestic financial headwinds have diminished." While the economy is in "reasonably good shape," she said, forecasters are extremely concerned about the impact of large federal deficits in the future. The panel of forecasters boosted its expectations for growth in 2010 to 3.2 percent real gross domestic product, up from 3.1 percent in its February outlook. It also pegged the 2011 growth rate at 3.2 percent. Household spending, while still lagging the overall economy, is still expected to grow significantly this year. The forecasters attribute part of that to consumers being less thrifty, with the saving rate for 2010 seen dropping to 3.4 percent from the 4.6 percent they predicted just three months ago. Source: Associated Press
In the middle of the federal government's National Small Business Week, two of the most successful Small Business Administration programs are about to run out of money again. The SBA announced last week that it is opening up its Recovery Loan Queue for the fourth time. For more than a year, the SBA has used money first allocated in last year's Recovery Act to temporarily reduce fees for borrowers and increase the guarantees banks receive on loans made through the agency's lending programs. The SBA's loan volume has picked up sharply in that time, a turnaround agency officials attribute to the stimulus incentives. But the funding for them ran out in November. Since then, the agency has relied on a series of temporary extensions to keep the loan sweeteners in place. Every time the money runs out, the SBA opens up its Recovery Loan Queue to track applicants hoping to collect the last few remaining dollars. The latest authorization for some of the loan incentives expires at the end of this month, and the money for them is likely to be exhausted even sooner. President Obama and many in Congress say they want the loan incentives extended for at least the rest of this fiscal year, which runs through September. But the two chambers of Congress haven't yet agreed on legislation to do that. Result: A series of emergency bills that so far have kept the funds flowing, but only after several brief expirations. "The stopping-and-starting is problematic," said SBA spokesman Jonathan Swain. "It is a complicating factor for our lenders and our borrowers. Source: Fortune
Retail vacancy rates hit 11 percent in the first quarter of 2010, but real estate services firm Colliers International says the worst appears to be over. Colliers expects vacancy rates to go still higher this year, but level off and begin to recover in 2011. "It appears that contraction in the U.S. retail real estate market is finally winding down, but not completely over," says Garrick Brown, Colliers International's U.S. retail research director. "We expect store closures to continue through year-end; but the return of credit and capital, coupled with an uptick in M&A activity, could be a much-welcomed shot in the arm for U.S. retail real estate," he says. Source: Colliers International
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