“These cars ain’t just hot - buying all those rims is helping the US GDP, man”
Dow: 13,108 (+0.03%) S&P 500: 1,411 (+0.08%)
It may not be much, but stocks finally turned green this week with help from 2 surprising econ reports. First, the Commerce Department revised its calculation of US Gross Domestic Product (GDP) growth in the 2nd quarter from 1.5% up to 1.7% (think of it as a grade change from “C” to “C+”…stick that up on the ol’ fridge). Then housing news impressed again as “pending home sales” increased more than expected in July to their highest number in 2 years. Despite both positives and the Fed’s “beige book” release, markets remained flat again in anticipation of Federal Reserve Chairman Ben Bernanke’s speech from Wyoming on Friday. Overall, trading was slow as molasses – August is a painfully slothful month for investors and today’s market activity (aka “volume,” the number of shares traded) was 25% lower than the 30 day average as the Dow inched up 5 points.
Fed’s “Beige Book” more positive on economy than previous publications
It may not be the 6th sequel to Fifty Shades of Grey,” but the Federal Reserve’s “beige book” is worth following . The 8-times-a-year report is published by the central bank roughly 2 weeks before their policy-setting meeting and summarizes the state of the economy in the country’s 12 Fed regions. Today’s publication observed modest/moderate growth across the country as econ activity continues to expand gradually. Retail sales (especially auto sales) jumped in most regions while employment remained sluggish and manufacturing was the primary area of concern. Investors though largely ignored the release because they want the real deal – Mr. Bernanke himself – who they hope will provide more clarity on the economy in his highly anticipated Friday speech. With today’s report more positive than the previous few, investors are left wondering as they sip their pina coladas whether the Fed will be willing to take on stimulus measures if the economy’s strength is improving.
G7 pressures oil-producing countries to increase supply as prices climb through the roof
As our econ professors used to explain, ‘tightly control supply and prices shall rise.’ That’s why until someone nails this whole cloning thing, teams are going to throw millions at guys like Jeremy Lin. It’s the same way with oil, and the oil-producing countries closely monitor how much they produce & export to the world in order to ensure prices stay high – If all countries produced more oil, prices would drop on the increased supply. That is exactly what the Group of 7 industrialized countries (“G7″) asked the oil producers of the world today. With technical problems in Venezuela, hurricane issues in the Gulf and econ sanctions barring Iranian imports, prices hit a Labor Day weekend high yesterday and the G7 fears high oil prices will hamper econ growth. If the oil producers (Russia, Venezuela, every dude with land in the Middle East, etc.) refuse, then the West may have to tap its oil reserves to meet the demand as the economy tries. Oil prices dropped 1/2 a percent on this new pressure to increase global oil supply of the commodity.
Tomorrow:
- The Jackson Hole symposium for the Fed we’ve been hinting at all week finally begins
- A healthy serving of consumer data: August Retail Same-Store Sales, July Personal Income, July Consumer Spending…
- The struggling Facebook (FB) is getting approval to sell of shares of its recent acquisition Instagram - how will investors react to the move?
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