Stocks up while economy remains in neutral July 09, 2010
It was a slow week for economic news, though you wouldn't know it by the stock market's vigorous activity. The major stocks indices jumped as traders are looking for a significant increase in second-quarter earnings. The S&P 500 Index jumped 5.4% for the week to 1,078 (for a year-to-date total return-including price change plus dividends-of about -2.3%). The 10-year U.S. Treasury note rose 7 basis points to 3.07% (for a year-to-date drop of 78 basis points).
Consumer spending plummets
Consumer credit balances plunged $9.1 billion in May, sharply at odds with the expected drop of $1.9 billion. April's revised figures showed a $14.9 billion drop, down from what had been seen as an unexpected gain. The steep decline reflected weak consumer spending as retail sales (minus motor vehicles) fell 1.1% in May, the largest decline since March 2009. Consumers continue to hoard their disposable income while waiting for a more consistent economic rebound.
Service sector slows
The Institute for Supply Management's nonmanufacturing index fell to 53.8 in June, lower than the 55.0 expected by most experts, another significant sign that the fragile economic recovery may be stalling. (Any number above 50 indicates growing economic activity.) Since the service sector accounts for roughly 90% of U.S. jobs, the disappointing number means service companies are hiring fewer new workers-one of the critical factors driving the nation's persistent unemployment.
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Steven C. Deller
Professor and Community Development Economist Department of Agricultural and Applied Economics
515 Taylor Hall --- 427 Lorch Street
University of Wisconsin-Madison/Extension Madison, WI 53706
608-263-6251
"Conformity can be costly in a world of uncertainty"
Nobel winning economist Douglass North
Recently published: Targeting Regional Economic Development For more info: http://www.routledge.com/9780415775915 |
