| TURNING POINT OF THE TRENDS OR AN ILLUSION OF OPTIMISM |
| The national unemployment rate fell to 5 percent from 5.1 percent in March. The U.S. Labor Department reported job loss in April, far fewer than many economists had anticipated. The service sector representing about 80 percent of U.S. economic activity gained about 140,000 jobs in April and household jobs rose by 361,000 (CNBC Kudlow & Company, May 2, 2008); bringing the Index of non-manufacturing business to 52% in April, from 49.6% in March. Household Jobs include small businesses and entrepreneurial jobs. Non Manufacturing Businesses includes enterprises involved in Real Estate, Engineering Firms and Recreation. New orders of durable goods (intended to last three years or longer) at U.S. factories, jumped a much stronger than expected 1.4 percent in March, a government report showed. Corporate profits (the financial sector excluded), a 2008, the Dow Industrial Average rose 1.3%, the Nasdag 2.2%, the S%P 500 1,1%, the Dollar rallied about 1% against other currencies in the basket of currencies forming the index. On the commodities side, the price of gold lost $31.7. Corn prices fell the most in six weeks and soybeans declined as farmers accelerated planting of the two biggest U.S. crops after above-average. Corn futures for July delivery dropped and Soybean futures for July delivery declined 1.4 percent. President Bush announced that taxpayers will start receiving checks from the stimulus package money this week. Economist estimate between 25 billions to 50 billions dollars of the rebates from the economic stimulus package of the Bush Administration will add to household spending in the coming months and may go to filling the gasoline tank and the refrigerator. b) The Lagging Indicators Three Wall Street Giants: JP Morgan Chase, Lehman Brothers and Morgan Stanley are planning more lay-offs. Morgan Staley itself is planning to send home about 1,500 employees of its securities firm workforce. Income slowed to 0.3% in March compared to the previous month increase of 0.5%. The Consumer Confidence Index declined to 62.3 in April from a revised reading of 65.9 in March. Higher Consumer spending led by higher costs in energy and food prices eroded the consumer potential buying power by about five billions of dollars. The ISM Manufacturing Index remained flat at 48.6 in April; readings below 50.0 denote contraction in the manufacturing sector. The monthly survey's gauge of inflation expectations surged to 6.8 percent from 6.1 percent in March. In February, Housing Prices fall about 12% from a year ago. The dollar weakened on this Monday May 5, 2008, after gaining last Friday on not as weak as expected U.S. jobs data. Food prices have climbed at an annual rate of 5.1 percent since the start of the year, with a possible reduction of the consumer potential buying power by five billions dollars. In addition, U.S. home foreclosure filings jumped 23 percent in the first three months of the year from the last quarter of 2007, and more than doubled from a year earlier, as more overextended borrowers failed to make timely payments, real estate data firm Realty Trac said last week. c) Decoding the data Brent Bozell from the Media Research Center said the Economy is not in recession, because recession means two consecutive quarters of negative economic growth and the US economy has not reached this stage yet. What we are seeing is a situation of weak GDP due to a decline in private investment and weak growth in personal consumption. Bill Gross, chief investment officer of Pacific Investment Management Co. (PIMCO) said "A continued housing deflation of several trillion more dollars now threatens to impact the real economy, which in turn might produce a reversal of financial market fortunes". Joseph Battipaglia, Market Strategist at Stifel Nicolaus mentioned that the Federal Reserve and its European Counterparts have for the third time reduced their requirements for the kind of collateral to lend money to banks and institutional investors while the economy is decelerating. Stuart Hoffman, PNC's chief economist said "The inherent optimism we have found among these business owners is absent in these new findings, reinforcing our view that the U.S. economy is falling into a short and shallow recession for the first half of this year". As we are at the beginning of the week, the market was paying close attention to see if signs of turning trends are emerging among the so-called "speculators" in the oil trade (which includes hedge funds, large investment funds and pension funds) as The Federal Reserve cut its Fed Funds Target rate by a quarter point to 2.0% from 2.25% and lowered the discount rate by a quarter point to 2.25% from 2.50%. In fact, Crude oil rose above $120 a barrel to a record in New York after a report showed that U.S. service industries expanded in April, signaling higher energy use and the weekend attack in Nigeria, Africa's biggest oil producer, forced Royal Dutch Shell Plc to reduce output, the Associated Press reported May 3, citing the company. Gold future rebounded from a third straight weekly loss, as oil hit to a record in New York and the dollar weakened against the euro. |