Weekly Economic Update for the Week of March 17, 2008

Weekly Economic Update for the Week of March 17, 2008

Quote of the week. “Life is a great big canvas; throw all the paint on it you can.” – Danny Kaye
Fed’s surprise move lifts stocks. Last week, the Federal Reserve announced it would ramp up its lending to aid the financial system, proposing to loan up to $200 billion in Treasuries to banks and brokerages in exchange for top-rated mortgage-backed securities. The loans will have 28-day terms. As Global Insight economist Brian Bethune put it, “the Fed is trying to say, ‘This isn’t as bad as you think and we’re going to put our money where our mouth is.’”¹ In response, the Dow Jones Industrial Average had its best day in more than five years: a gain of 416.66, or 3.6%.²
Hint of hope for housing sector? The good news: according to RealtyTrac, America’s foreclosure rate dropped 4% in February. The bad news: foreclosures were still up 60% versus February 2007. Also, the latest data showed the number of REO properties up 110% from a year ago.³CPI flat, but retail sales down. Did it just become easier for the Fed to cut interest rates? Maybe. New Labor Department data showed the Consumer Price Index unchanged for February; core CPI also stayed flat. Analysts had expected both benchmarks to rise 0.2% for the month.⁴ The Commerce Department reported a 0.6% decline in retail sales for February; the numbers were not as bad as those in December (-0.7%), but they were down from January (+0.4%).⁵$1,000 gold, $110 oil. As expected, gold prices cracked the $1,000 ceiling last week and wound up at $999.50 Friday afternoon on the New York Mercantile Exchange.⁶ Oil hit $111 a barrel on Thursday; prices settled at $110.21 on the NYMEX on Friday.⁷
A winning week. Thanks to last Monday’s liftoff, stocks had their best week in months, even with a 195-point drop on a wild Friday after the Fed moved to bail out Bear Stearns Cos. from its liquidity crisis.⁸ On Friday afternoon, Moody’s Investors Service downgraded the long-term rating of the investment banking giant to Baa1 from A2.⁹

% Change	Y-T-D	1-Year	5-Year
DJIA	-9.90	-1.52	+52.06
NASDAQ	-16.58	-7.20	+65.07
S&P 500	-12.27	-7.69	+54.59

(Source: CNNMoney.com, USAToday.com, 3/14/08)¹⁰

Riddle of the week. A man ate an egg each day. He had no chickens at home, and he never bought, borrowed or stole chicken eggs. How was it possible?

Contact my office or see next week’s Update for the answer.

Last week’s riddle: What can explode slowly, with no smoke or flame?

Answer: A population.

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The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx^®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. These views should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance is historical and not indicative of future results. The market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards.

Citations. ¹ latimes.com/business/investing/la-fi-econ12mar12,1,4491163.story
² nytimes.com/2008/03/12/business/12stox.html?hp
³ msnbc.msn.com/id/23601813/
⁴ news.yahoo.com/s/afp/20080314/ts_alt_afp/useconomyinflation_080314133253
⁵ msnbc.msn.com/id/23609249/
⁶ bloomberg.com/apps/news?pid=20601012&sid=aUHBbPsVgKrw&refer=commodities
⁷ msnbc.msn.com/id/12400801/
⁸ msnbc.msn.com/id/3683270/
⁹ foxbusiness.com/markets/industries/finance/article/moodys-downgrades-bear-stearns-baa1_521513_9.html

⁶S&P 500, 5-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F14%2F03&mode=add&symb=SPX
⁶S&P 500, 1-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F14%2F07&mode=add&symb=SPX
⁶NASDAQ, 5-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F14%2F03&mode=add&symb=COMP
⁶NASDAQ, 1-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F14%2F07&mode=add&symb=COMP
⁶DJIA, 5-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F14%2F03&mode=add&symb=INDU
⁶DJIA, 1-year change: money.cnn.com/quote/historical/historical.html?pg=hi&close_date=3%2F14%2F07&mode=add&symb=INDU