6/1/09

Good morning. I hope you enjoyed the weather this weekend. Despite news that General Motors is heading for bankruptcy court, Stocks are starting off strong today after China's manufacturing expanded for the third straight month--signaling that the worldwide recession may be ending. Also today, Personal Spending declined slightly in May, while Personal Income came in better than expectations thanks in part to the economic stimulus package. Overall, indications are that the market may be in the beginning of a bottoming process. But, this process will likely be marked by volatility and confusion,
May was the third month in a row for stock market gains. Stocks have been appreciating as the credit freeze and bank liquidity crisis has eased, while a growing number of economic indicators have signaled a marked moderation in the pace of the economic decline. As one would imagine, this has not helped rates. The S&P 500 stock index has gained about 34% since its March low. Jobless Claims are slowing down, consumer confidence is increasing with an increasing number saying that they will be buying durable goods soon, and oil prices are rising due to the expected recover. But as yields have increased, so has the number of economists who believe that this will only dampen the recover, since higher rates put a damper on housing and borrowing in general, especially refi’s. And it has the potential to cancel out the Fed’s effort to lower the cost of borrowing for consumers and businesses across a broad spectrum of loans and bonds.

For economic news it is a busy week. We have already had GM filing for bankruptcy, Personal Income and Consumption (consumer spending fell in April by .1% despite personal income posting the largest increase in 11 months, up .5%), and later this morning we will have Construction Spending and the ISM Index. Tomorrow we take a break, but Wednesday we resume with Factory Orders and the ISM Services index. On Thursday we have Jobless Claims and Productivity, and then on Friday the slew of employment data. Hang on to your hats! As always, I’ll be in touch.