RATES STABLE IN HOLIDAY-SHORTENED WEEK
[Lenny Holler, Preferred Empire Mortgage Company]
This week’s holiday-shortened slate of economic news raised some concerns about the threat of inflation. Unit labor costs, a measure of the cost of productivity, were revised upward significantly for both first and second quarters, and much higher than expectations. On the other hand, productivity growth for the second quarter only remained steady, being revised up moderately to an annualized 1.6%. In its "Beige Book," the Federal Reserve Board noted continued economic expansion from mid-July through late August, though higher costs for energy and construction dampened growth in some areas.
Despite the slightly worse news on inflation, the week ended well with oil prices making new lows into the mid $60 range and the president of the Cleveland Fed (who sits on the Fed's rate setting committee) noting in a speech that while she remains concerned about inflation, the Fed's previous efforts to fight such a general rise in prices, including more than two years of interest-rate increases, are still taking hold as the economy slows. This would support the idea that the Fed is done raising rates for now. It still seems likely that the incoming data will be crucial in making any determinations on the direction of rates. With the data we have seen thus far, it appears that rates should continue to stabilize at these lower levels. Inflation numbers for August will be watched with interest when next Friday’s report on the Consumer Price Index is released. Also due next week are reports on international trade (Tuesday), retail sales and business inventories (Thursday), and industrial production (Friday).
· 10 year treasury yield up for the week from 4.72% to 4.77%. 2 year treasury up from 4.76% to 4.81%.
· Oil down sharply for the week from $69.19 per barrel to $66.25. Gold down from $624.40 per oz. to $609.60.
· The dollar was down versus the yen from 117.11 to 116.90 and the Euro was down against the dollar at $1.2671 from $1.2839.
· Stocks were down for the week (S&P500 down 0.92%, Dow Jones down 0.63% and Nasdaq down 1.25%).
This week’s holiday-shortened slate of economic news raised some concerns about the threat of inflation. Unit labor costs, a measure of the cost of productivity, were revised upward significantly for both first and second quarters, and much higher than expectations. On the other hand, productivity growth for the second quarter only remained steady, being revised up moderately to an annualized 1.6%. In its "Beige Book," the Federal Reserve Board noted continued economic expansion from mid-July through late August, though higher costs for energy and construction dampened growth in some areas.
Despite the slightly worse news on inflation, the week ended well with oil prices making new lows into the mid $60 range and the president of the Cleveland Fed (who sits on the Fed's rate setting committee) noting in a speech that while she remains concerned about inflation, the Fed's previous efforts to fight such a general rise in prices, including more than two years of interest-rate increases, are still taking hold as the economy slows. This would support the idea that the Fed is done raising rates for now. It still seems likely that the incoming data will be crucial in making any determinations on the direction of rates. With the data we have seen thus far, it appears that rates should continue to stabilize at these lower levels. Inflation numbers for August will be watched with interest when next Friday’s report on the Consumer Price Index is released. Also due next week are reports on international trade (Tuesday), retail sales and business inventories (Thursday), and industrial production (Friday).
· 10 year treasury yield up for the week from 4.72% to 4.77%. 2 year treasury up from 4.76% to 4.81%.
· Oil down sharply for the week from $69.19 per barrel to $66.25. Gold down from $624.40 per oz. to $609.60.
· The dollar was down versus the yen from 117.11 to 116.90 and the Euro was down against the dollar at $1.2671 from $1.2839.
· Stocks were down for the week (S&P500 down 0.92%, Dow Jones down 0.63% and Nasdaq down 1.25%).
posted by rjgny2004 at 3:27 PM
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