Although Federal Reserve Policymakers Are Set to Meet, They Have Little Room to Maneuver
Aug 4th, 2008 | By William Patalon III | Category: Financial News, Politics & Economics| Market/ Index |
Year Close (2007) |
Qtr Close (06/30/08) |
Previous Week |
Current Week |
YTD Change |
| Dow Jones Industrial |
13,264.82 |
11,350.01 |
11,370.69 |
11,326.32 |
-14.61% |
| NASDAQ |
2,652.28 |
2,292.98 |
2,310.53 |
2,310.96 |
-12.87% |
| S&P 500 |
1,468.36 |
1,280.00 |
1,257.76 |
1,260.31 |
-14.17% |
| Russell 2000 |
766.03 |
689.66 |
710.34 |
716.14 |
-6.51% |
| Fed Funds |
4.25% |
2.00% |
2.00% |
2.00% |
-225 bps |
| 10 yr Treasury (Yield) |
4.04% |
3.98% |
4.11% |
3.95% |
-9 bps |
Economically Speaking
Economists got their first look at the overall growth numbers for the second quarter as Gross Domestic Product (GDP) climbed by 1.9% during the three-month period. While the data seemed to put the economy safely out of recessionary territory (for now), analysts actually had been hoping for a 2.4% growth rate on the heels of the tax rebates that arrived in May. The eternal pessimists remain fearful that subsequent quarters will prove far weaker without any additional economic stimulus plans.
Consumer confidence rebounded (ever so slightly) from a 16-year low as declining energy prices eased the prior inflationary fears. Activity within manufacturing was reported right at the “boom/bust line” of 50 as the Institute for Supply Management ISM Index indicated neither expansion nor contraction during July. Construction spending fell again (the 11th month of declines in the past 13), proving that the country will not be experiencing a housing rebound anytime soon.
All eyes were on the labor picture as economists hoped that the domestic layoffs were starting to subside and college grads would be joining the summer work force just in time to stimulate growth. Early in the week, the Automated Data Processing (ADP)/ADP Survey indicated that private sector employment was on the rise and 9,000 new jobs actually had been added to the economy. Unfortunately, the euphoria was short-lived; on Friday, the unemployment rate was reported at 5.7%, its highest level in four years. Meanwhile, 51,000 jobs were lost from the labor force, the seventh-straight month of a shirking non-farm payroll picture. While the July cuts were slightly below expectations, analysts could not help but focus on the fact that more than 460,000 jobs have been eliminated so far this year.
Weekly Economic Calendar
| Date | Release | Comments |
| July 29 | Consumer Confidence (07/08) | Bounced back from 16-year low |
| July 31 | GDP (2nd qtr) | 1.9% growth rate not as strong as expected |
| Initial Jobless Claims (07/26/08) | Highest level of claims in five years | |
| August 1 | Unemployment Rate (07/08) | Highest rate in 4 years |
| Nonfarm Payroll Additions (07/08) | 7th straight month of job losses | |
| Construction Spending (06/08) | Fell for 11th month out of past 13 | |
| ISM Index – Manu (07/08) | Flat report reveals no growth or contraction | |
| The Week Ahead | ||
| August 4 | Personal Income/Spending (06/08) | |
| Factory Order (06/08) | ||
| August 6 | ISM – Services (07/08) | |
| Fed Policy Meeting Statement | ||
| Consumer Credit (06/08) | ||
| August 7 | Initial Jobless Claims (08/02/08) |
Source: Although Federal Reserve Policymakers Are Set to Meet, They Have Little Room to Maneuver
Pages: 1 2
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William (Bill) Patalon III is the Managing Editor and Senior Research Analyst for Money Morning, and is also the Managing Editor for The Money Map Report. Patalon's work has appeared in Kiplinger's personal finance magazine, USA Today, and The South China Morning Post, among other publications.
