The S&P 500 Index and the Nasdaq Composite Index each hit five-month highs, although some profit-taking set in as the week came to a close. Hopefully, the weekend will bring some positive developments in Myanmar and China (or, at least, a beginning to the end of the devastation).

Economically Speaking

As regular Money Morning readers know all too well, we are big believers that Wall Street analysts are a fickle bunch. Just a few weeks ago, virtually everyone and their mothers believed that a recession was fait accompli (my mother was a holdout). In a recent Merrill Lynch & Co. Inc. (MER) survey, only 29% of global fund managers expect the whispered-about “R” word to become a reality and many now feel that inflation is a greater domestic concern. Some economists are crediting the work of the Fed for improving the credit markets, though Federal Reserve Chairman Ben S. Bernanke himself claimed that the situation remained “far from normal.” Bernanke, however, did praise financial institutions by noting that he is “encouraged by the recent ability of banks to raise capital from diverse sources.” Meanwhile, the bankers themselves continued to offer less-than-favorable assessments.

JPMorgan Chase & Co. (JPM) Chief Executive Officer James “Jamie” Dimon believes that the credit crisis is nearing an end, but “the recession is just beginning.” Likewise, Bank of America Corp.’s (BAC) Global Consumer Banking president, Liam E. McGee, finds that consumers still feel “significant economic pressure.”

Turning to the numbers, retail sales dropped by 0.2% in April, as auto sales suffered its worst showing in 10 months. Once autos were factored out of the data (some economists always look for that silver lining), retail sales actually surged by 0.5%, a much better result than many analysts had expected.

Likewise, the news from the inflation front was not half-bad either. The consumer price index (CPI) climbed by only 0.2%, despite the significant rise in food costs. Still, many economists point out that oil and gas prices are setting new records daily (thanks Goldman), and the overall inflation picture may get worse before it gets better. Though housing starts skyrocketed in April – recording their largest gain in over two years – the naysayers remain pessimistic on the sector, contending that the increase was the result of apartment construction and noting that single-family home starts continue to struggle. Despite some positive economic readings, a consumer confidence poll revealed that recent sentiment fell to its lowest level in 28 years.

Weekly Economic Calendar

Source: Talks About Inflation and Interest Rates Will Be on the Front Burner This Week as Economic Speculation Resumes

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