Empire State Manufacturing

Source: New York Fed

YoY CPI Drops Most Since 1955

All in transportation, but disconcerting regardless. Bloomberg reports:

“Demand simply remains too weak for most businesses to find any success in pushing through price hikes at this point, Russell Price, a senior economist at Ameriprise Advisor Services in Detroit, said before the report. “Widespread price cuts however, are also unlikely especially given the recent evidence that the economy may be stabilizing.”

From a year ago, consumer prices fell 0.7 percent, the biggest decline since 1955. Excluding food and energy, prices climbed 1.9 percent from April 2008.

Contribution

By Category

Source: BLS

Europe Crushed... GDP Down 2.5% QoQ

AP details:

The economy of the 16 countries that use the euro shrank by a massive 2.5 percent in the first quarter as the recession tightened its grip all across the continent. Key export engine Germany saw output swoon.

The euro zone has now seen output decline for four consecutive quarters. After modest 0.2 percent decreases in the second and third quarters of 2008, gross domestic product declined by 1.6 percent in the fourth quarter.

But the recession has deepened as global trade has dropped off sharply, with exporters like Germany, the euro zone's biggest economy, badly hit. In the first quarter, Germany's economy shrank 3.8 percent as demand for its high value goods, such as cars and machinery, collapsed.

The first quarter drop in the euro zone, compared to the quarter before, was far more than the consensus expectation just a few days ago, when most economists were predicting a quarterly decline of around 2 percent. But figures Wednesday already showed that industrial production — key to the European economy — was suffering worse than expected.

Note that all Eurozone countries haven't yet reported data.



Source: GDP

Fighting "Deflation" Irish

Ahead of this morning's CPI figure, Ed from Credit Writedowns takes a look at some ugly inflation (or lack thereof) in Europe:

In my opinion, the ECB’s recent announcement that it was getting into the covered bond market has a lot more to do with Spain and Ireland than it does with Germany. Spain and Ireland suffer from their joining the Euro to escape the impossible trinity of free exchange rates, independent monetary policy and free capital movement. Having sacrificed monetary policy for a fixed exchange rate, the Spanish and Irish are seeing some horrific debt deflation dynamics. The ECB seems to have awoken to this and is now engaged in quantitative easing via the covered bond market (although Trichet denies this).

(note the chart below is quarter over quarter change annualized)


Of course this is of no surprise to readers of EconomPic (time to brag... I'm wrong enough that I have to):

• The Irish Dr. Doom... or Just an Exaggerating Economist?
• Is it Possible that a Country will Leave the Eurozone?
• Spain Downgraded, Ireland to Follow?

The Second Derivative of Green Shoots is Positive!

In response to my post on retail, reader ZachA commented / requested:

I guess this means this means the "second derivative" is non-existent and thus the new data points to a continuation of the "first derivative" accelerating downward. I get my derivatives mixed up, but nonetheless the data is getting worse.

Jake, if there is anyway possible to efficiently generate a graph on how often "green shoots" or "second derivative" is uttered on CNBC when non-apocalyptic data is released please do it.

Here is the best I could do (the 'second derivative' search was too dominated by "actual" second derivative [i.e. mathematical] searches)



Though this doesn't answer the question as to which term is more annoying?

Source: Google Trends

Update: for those interested in the origins of green shoots, a reader was kind enough to send over this link

Yield Curve to Predict Equity Markets? Yes and No

Interesting article in Bloomberg about the yield curve accurately forecasting economic conditions:

• First, it’s a leading economic indicator, officially added to the index designed to predict the economy’s ebbs and flows in 1996. It was a leader well before that, even though it was unofficial.
• Second, what you see is what you get. The spread is never revised, always available and in no way proprietary.
• Third, and most curious, the majority of economists don’t get it. They see rising bond yields in isolation -- without paying attention to what that price-setter, the Fed, is doing at the front end of the curve.
• It’s the juxtaposition of short and long rates, not their level, that conveys information about monetary policy.

Crossing Wall Street makes the case that the yield curve can also help predict the stock market:

Two years ago, I looked at the impact of the yield curve on the stock market and I was stunned to find:

Probably the most fascinating stat is that all of the stock market’s net capital gains have come when the 10-year yield is 65 or more basis points above the 90-day yield (that happens about 70% of the time). The yield curve hasn’t been that positive in 15 months.

Anything less than 65 basis points, including a negative yield curve, works out to a net equity return of a Blutarsky. Zero Point Zero.

Today the spread is out to nearly 300 basis points.

Yes, over the past 25 years (all the data I was able to pull) a flat yield curve did equate to a poor performing equity market over the subsequent two year period. However, a high spread between the 10 year and 90 day yield did not necessarily mean strong returns were on the horizon (see 1992 and 2002 noting that the red line indicate the two year FORWARD return).



What did? Sustained periods of a steep yield curve.

So the question becomes, what type of economic conditions usually persist in order to have SUSTAINED periods of a steep yield curve? My quick answer... expectations of higher growth for an extended period that is reinforced by a rebound in the economy (allowing long rates to STAY higher than short term rates).

My concern this time around isn't around short-term rates (they will likely stay low), but long term rates may now be influenced not only by expectations of economic growth, but by issuance and inflation expectations.

Producers Price Index (April)

Month over Month

Year over Year

Source: BLS

A Decline in Retail Sales is a "Surprise"... Really?

I was out of the matrix yesterday, thus getting to this now.

Retail sales fell, which came at no "surprise" here. Just look at the crash in wholesale sales YET rising inventory to sales levels over the past few months. And this was the explanation for the market crash? Why do we need to make an economic excuse for any and every market move. Peter Boockvar via The Big Picture sums it up nicely (bold mine):

April Retail Sales were weaker than expected, falling .4% headline and .5% ex auto’s vs the consensus of flat and up .2%. Also, March was revised lower both headline and ex auto’s. Sales ex auto’s and gasoline fell .3%. Sales fell in furniture, electronics, food/beverages, department stores, and online. Gains were seen in restaurants/bars, sporting goods, health/personal care and in building materials.

All the green thumb gardeners out there can count as many shoots as they want but the US economy still comes down to the activities of the US consumer and the consumer is still retrenching, paying down debt, saving and getting their credit lines cut. This is a long term process and with a still difficult labor market, won’t change anytime soon.

Month over Month


Year over Year (psst... it's getting worse)


Source: Census

Yankees Economics

Wondering why Yankees seats look empty?

Click for larger image



Source: NY Post via Kottke.org

It Pays to Lobby

FireDogLake reports:

An FDL review of lobbying reports for the first quarter of 2009 reveals that banks receiving federal bailout funds spent over $13 million lobbying against consumer interests and for the financial benefit of their executives.

In the first quarter of 2009, banks such as Bank of America, JP Morgan and Wells Fargo that received billions in taxpayer assistance focused their lobbying efforts on defeating attempts to regulate credit card practices, specifically caps on interest rates. They also lobbied extensively to prevent legislation that would have allowed bankruptcy judges to write down mortgage principle ("cramdown"), which FDL examined yesterday. At the same time, they lobbied on behalf of their executives to be paid without limit.

Below is a chart of bailout funds received as a multiple of that $13mm spent on lobbying in the quarter.



Don't feel too bad for Credit Suisse... while the lowest "multiple", that $580k still got them $400mm. Not too shabby.

Government Receipts Down 34% Year over Year

Bloomberg noted with regards to yesterday's budget release:

The U.S. reported the first budget deficit for April in 26 years, recording a shortfall in the month that usually sees a jump in individual tax payments before the Internal Revenue Service’s mid-month deadline.

“When the government can’t post a surplus in April, you know things are dire,” said Richard Yamarone, director of economic research at Argus Research Corp. in New York. “It’s going to take a very long time until we see anything close to a balanced budget.”

Stripping out receipts ONLY, we see a whopping 34% decline from April 2008.



Source: Treasury

Japanese Exports to China > to U.S.

Ugly all around for Japan, but the relative strength of the Chinese economy to that of the U.S. is rather telling / interesting. Bloomberg reports:

Japan’s exports fell 46.5 percent in March from a year earlier, today’s report showed, after declining a record 50.4 percent in February. Imports slid 37.8 percent, compared with an unprecedented 44.9 percent drop the previous month.

Shipments to China sank 31.6 percent in March, after falling 39.7 percent in the previous month, according to a separate trade report released last month. Exports to the U.S. fell 51.4 percent after dropping 58.4 percent in February. Today’s figures don’t include regional breakdowns.

“China’s economy has started rebounding, but the emerging economies on the whole aren’t strong enough to lead the world economy,” RBS’s Nishioka said. “Capital probably won’t flow back into the emerging nations unless the industrialized countries return to growth.”

Source: Customs.Go.JP

Coffee Crisis? Not really...

FT reports:

Caffeine addicts face higher prices for their daily fix as the wholesale cost of both coffee and sugar rise sharply because of poor crops and robust demand.

“We are in a dangerous situation,” Andrea Illy, chief executive of Italy’s leading coffee ­company, told the Financial Times, warning that prices could “explode” due to supply shortages.

His comments echo those of other industry players – and point to a sharp shift in sentiment among analysts.

Until recently, it was widely assumed that the global economic crisis would damp consumption and prices for coffee. However, that forecast proved wrong, since demand for coffee has remained high, even while consumers have moved from cafés to home drinking.

International coffee prices last week hit a seven-month high, rising to $1.28 per pound, up 22 per cent from their December low, in New York trading.

Scared me for a second.



It looks like coffee has gotten hit by the recent rebound in commodities, but that's like saying "oh no, gas is back to $2 a gallon". Lets just be thankful that coffee isn't back to the equivalent of $4 a gallon.

Chinese Exports: "Second Derivative" Turns Negative

If we're going to talk about EVERY second derivative (starting to really hate that term), here's one that doesn't bode well (though I will like to point out that the embedded margin of error makes this second derivative minuscule). But... the second derivative of Chinese exports has declined in April from March. Yves at Naked Capitalism with the details:

So much for the green shoots theory, at least as far as an early Chinese recovery is concerned. From AFP (hat tip reader Michael):

Chinese exports fell 22.6 percent in April from a year earlier in the sixth straight monthly decline, state media said Tuesday,... Exports from the world's third-largest economy totalled 91.94 billion dollars last month...

The drop was larger than that recorded in March, despite hopes that China's exports performance would start to improve.

Commerce ministry spokesman Yao Jian said in April that China was confident exports would improve "on the basis of the gradual recovery seen in the first quarter."

Exports in March fell by 17.1 percent year-on-year, narrowing from a 25.7 percent dive in February, the worst slump in more than a decade.

Trade Balance Flat in March

Source: Census

Financials Rocketed, But Is There Any Fuel Left?

The AP reasons:

Financial stocks fueled Wall Street's rally last week. On Monday, they sent the market into reverse.

Hardly a week... since March 6th Financials are up 100%, leading the S&P 500 three-fold.



Sustainable?

Source: Yahoo

Chinese CPI Still Negative

WSJ details:

China's main inflation measures remained in negative territory in April, new data issued Monday show, but economists said the risk of sustained deflation in the world's third-largest economy is subsiding as bank lending surges and other economic indicators start to show improvement.

But much of the current drop reflects a comparison with a huge price spike in the first half of 2008: inflation in April last year was 8.5%. Prices of raw materials have actually been picking up in recent weeks, though they remain below last year's highs.

That reflects increasing indications that China's economy is bottoming out: Growth in fixed-asset investment and industrial output accelerated significantly in March. Chinese banks are also pumping enormous amounts of liquidity into the economy, extending 4.58 trillion yuan (around $671 billion) of new yuan loans in the first three months of 2009, nearly as much as in all of last year.

Unwanted Part Time Worker Spike

In response to my post Net Claims is What Matters, Locust responds:

For what it's worth...

I work as a W-2 employee on a project by project basis. One of the things I've noticed - and this seems to be a relatively new phenom - is that I am being contracted for fewer days. So what used to be a typical 5 week project (25 days) is now shaved down to 4.5 weeks (22 days).

Yeah, it's just 3 days. But multiply that times 100 people and it's a year of employment in man days that's gone poof.

That theme also plays out in the data.



Source: BLS

We're All Euro Now: Government Spending at 45% of GDP

Chuck Dietrick with the details:

One of the more disconcerting statistics is government spending as a percentage of GDP. In 1903, the figure was 6.8% for the U.S. In 2009, it's projected to be 44.72%—a greater than 8% increase over the average of the previous 5 years—not particularly encouraging. Less encouraging are the comparisons with major Western European countries. In 2007, France was at 61.1%, Sweden and Denmark 58.1%, Italy 55.3%, the UK 50%, and Germany 48.8%. Yep, we're on the march to be the equal of those paragons of economic stagnation.

The below chart details this run up since the early 1900's (Federal, State, and Local as a percent of GDP); government spending is now projected to be at the highest level as compared to GDP since WWII.

Source: US Government Spending

Watch out Hack Wilson

A little (or a lot) off topic, but the stats Evan Longoria is putting up in 2009 are unreal (for non-baseball fans, Hack Wilson knocked in 191 runs in 1930). Upon Further Review with the details:

It's still too early to talk about things like the fact that Albert Pujols is on pace to hit 59 home runs or Zack Greinke is on pace to go 32-5 with 316 strikeouts, zero home runs allowed and a record-breaking ERA of 0.51. However, there is one fast start that I want to highlight now that we're five weeks into the season: Evan Longoria's 44 RBIs. That puts Longoria on pace to drive in 236 runs this season.

Will Longoria drive in 236 runs? No. But consider this. If Longoria were to maintain a more attainable, but still amazing, pace of 150 RBI/162 games over the course of Tampa Bay's 130 remaining games, he would drive in 120 runs between now and the end of the season. Add the 44 RBIs he already has in his hip pocket, then he'd finish with 164 RBIs. That would be the most since Manny Ramirez's 165 ribbies in 1999.

Source: Yahoo Sports

EconomPics of the Week (5/8/09) - 1000 Posts to Date Edition

Economic Data
Wholesale Sales Debacle Continues...
ISM Services: Contracting at Slower Rate
Chinese Manufacturing Expands
Chinese Power Generation... The Other Side of the Story
Construction Spending on the Rise: Religious Facilities Not So Much
April's Ugly Auto Sales...
Retail Sales: Discount and Teen = Good
Productivity Up; Hours / Output Down

Employment
Net Claims is What Matters
ADP Employment Report Shows Improvement
Government Payroll Warping Overall Data?
Gap Between "Haves" and "Have Nots" Widens
Unemployment to 8.9%; Broader to 15.8%

Banks / Credit
SCAP Results
Consumer Credit Contracts...
Stress Test Capital Requirements vs. Total Assets

Assets / Markets
Underwater Houses
What Comes Down... Must Go Up
A Home on the Cheap(er)
The Good: S&P 500 Up on the Year; The Bad: Back to 1997 Levels
Pending Home Sales Up
Hedge Fund Rebound Continues
GM in Picture Form... It's Ugly
"Maturity Premium" Approaching 20 Year High
The New "Distressed" Assets

Other
Happy Odd Day!
Obama to Cut 0.5% of Budget... Is This a Joke?
You Can't Buy a Championship... or Can You?

Wholesale Sales Debacle Continues...

You sure the worst is behind us? Even though inventories dropped along with these sales, the inventory to sales ratio continues to rise.



Source: Census

Government Payroll Warping Overall Data?

Last unemployment post of the day. Across the Curve with the details:

This report does not look real swell to me. The net revisions subtract 66K and the one area of strength was government workers where my friends at UBS had a nice call on the census worker hiring (66K also). Back out the 132K and you get -671.

Source: BLS

Gap Between "Haves" and "Have Nots" Widens

Source: BLS

Unemployment to 8.9%; Broader to 15.8%

Unemployment vs. Broader Level


Change in Employment by Age / Sex


Change in Non-farm Payroll vs. Birth / Death Additions

Source: BLS (Birth / Death) / BLS (Unemployment)

Net Claims is What Matters

Ahead of today's unemployment report...

Ed, from Credit Writedowns, had a post last week which sparked a back and forth between the two of us about a decline in initial claims marking the end of the recession. I wasn't / still am not so sure this time around. Ed stated:

So, jobless claims are definitely a number to watch as we head into the spring and summer. Absent claims numbers averaging 700,000 by mid-to-late summer, it will be safe to say, we are on the road to recovery. What kind of a recovery we get is another entirely different question.

A summary of my response is as follows:

I understand that a bottom in the 4-week moving average for initial claims (i.e. firings) has historically been a leading indicator for an economic bottom, but that needs to correspond with the hiring of those that had previously been laid off in areas of the economy that are rebounding. In other words, the total number of unemployed people is what is relevant and while that has historically correlated with initial claims, it has diverged this go around.

Those individuals already unemployed, have remained unemployed FAR longer this cycle than past cycles, hence the reason why continuing claims continues to grow, even while initial claims reverses course. Thus, even with a decrease in initial claims, continuing claims will continue to rise (if the number of people laid off is greater than the number of people rehired into the workforce, the overall unemployment rate will continue to rise as well).

An example... if the number of people laid off drops from 600,000 to 500,000 (a SUBSTANTIAL drop), the unemployment rate can still grow if either of the following two things happen (all else equal):

1. The workforce grows (we need to hire people just to keep the unemployment rate level)
2. The number of people rehired + those that fall out of the workforce is less than the number fired (i.e. 500,000)

Why?

Initial claims are ONLY new jobless claims filed by individuals seeking to receive state jobless benefits, thus only those people that have been fired.

Continuing claims take into account those people that have already been fired for at least a week and continue to receive state jobless benefits.

Thus, if firms are firing less, but hiring by a smaller amount than that... continuing claims rise even though initial claims fall.

Here are charts of this exact phenomenon. It shows the one-year and 4-week changes in the number of those fired (i.e. the initial claims) less than number of people that have been hired (or fallen out of the workforce). To do this I took the previous week’s initial claims and removed the change in the continuing claims.

Rolling 12-Month

Rolling 4-Week

To conclude… even though initial claims is slowing / declining, the above figure keeps rising (to be a drag all it needs to do is stay above zero). In most recessions, firms that are strong will begin to hire more people when they sense a rebound than are fired by struggling companies, thus when initial claims flatten it has marked a bottom. I personally question whether this will happen this time. From what I’ve heard in the job market, many firms still have a hiring freeze through the year and/or are still shedding capacity.

SCAP Results

Source: WSJ

Consumer Credit Contracts...

Until we see an expansion of credit, the Fed can pump all the liquidity into the market as they want and it won't be inflationary.

Percent Terms

Dollar Terms

Source: Federal Reserve

Obama to Cut 0.5% of Budget... Is This a Joke?

The Washington Post details:

"We can no longer afford to spend as if deficits do not matter and waste is not our problem," Obama said. "We can no longer afford to leave the hard choices for the next budget, the next administration, or the next generation."

But the proposals to trim 121 programs identified by the White House as wasteful or unnecessary amounted to only one-half of 1 percent of the $3.55 trillion budget Obama has submitted for the fiscal year that begins in October.

GM in Picture Form... It's Ugly

Yahoo details:

General Motors Corp. posted a $6 billion first-quarter loss and said it spent $10.2 billion more cash than it took in during the first three months of the year as revenue plummeted by $20 billion. Chief Financial Officer Ray Young said talk of the company going into bankruptcy reorganization protection appeared to have scared some consumers away from buying GM vehicles.

GM faces a June 1 government deadline to finish a restructuring plan or go into bankruptcy protection. GM's loss for the quarter amounted to $9.78 per share, compared with a loss of $3.3 billion, or $5.80 per share in the year-ago period.

Retail Sales: Discount and Teen = Good

Bloomberg details:

The Easter holiday, aggressive marketing and deep discounts during April drove more traffic into stores, boosting sales, according to Richard Jaffe, an analyst at Stifel, Nicolaus & Co. in New York. The trend could continue this month, Jaffe said.

“With the second half of 2008 so difficult, we believe that retailers took draconian steps to better position themselves for a challenging and uncertain 2009,” he wrote in a May 4 note.

Higher end stores... not so much.

Productivity Up; Hours / Output Down

Marketwatch with the details:

Productivity rose in the first quarter as U.S. firms slashed their workforce, outpacing the drop in output, the Labor Department reported Thursday. Productivity in the nonfarm business sector - output per hour worked - rose at a seasonally adjusted annual rate of 0.8% in the quarter as output fell 8.2%, while hours worked fell 9% -- the largest drop in hours since 1975.

Economists polled by MarketWatch had expected no change in productivity, and a 3% gain in unit labor costs. Compared with the first quarter in the prior year, productivity was up 1.8%, while unit labor costs rose 2.4%. Within manufacturing, productivity fell 3.4%, while output fell a record 22.4% and hours declined a record 19.7%. The data go back to 1987. Unit labor costs in manufacturing rose 16.7%.

Source: BLS

"Maturity Premium" Approaching 20 Year High

Across the Curve details:

The 2 year/10 year spread has reached 225 basis points. That is approaching the very wide end of the range which has prevailed for that spread for the lat three decades. So a little history.

The cycle wide in this market iteration was achieved in November when it touched 261 basis points.

The 2year/30 year spread currently sits at about 318 basis points. In 2004 it peaked at 364 basis points.

Returning to the fixed income markets, I think that the record spreads which I have cited are in peril aas the market cchokes on the burden of supply from the Treasury.

Happy Odd Day!

For all you # geeks out there, the AP details:

For the mathematically challenged, Thursday's date, 5/7/09, is one of only six this century that will feature three consecutive odd numbers.

Source: Greg Mankiw

Chinese Power Generation... The Other Side of the Story

Although we detailed that Chinese PMI rebounded, the electricity usage seems to paint another story. How? Naked Capitalism with the details:

As readers may know, power use is considered a good gauge of economic activity. And while many have pointed to loan growth as an indicator that China is making a recovery, energy consumption has yet to confirm it.

Looking at the rolling one year level of Chinese power generation we see a huge continuous ramp up until mid-2008, then... not so much.



ChinaStakes with more:

Power generation in China dropped again in April, indicating that the macroeconomic rebound the market has expected is yet to appear. According to the State Grid’s latest statistics, April’s national power generation totaled 274.763 billion kwh, a fall of 3.55%, year on year, and a decline of over 3% from the previous month.

The Ministry of Industry and Information Technology says that in the first three months of this year, China’s power consumption totaled 780.990 kwh, down 4.02%, year on year, and power consumption in March alone totaled 283.389 kwh, down 2.01%....

Zhu Baoliang, an expert at the State Information Center, says the main reason for South China’s power generation decline is the recessionary fall in agriculture and light industry exports. “External demand may not recover until the end of the second
quarter.”

In the short term, there’s still heavy pressure for economic slowing. Although PMI is continuing to rebound, some sub-indicators such as materials and finished product inventories are falling back again, indicating no increase in terminal demand. Wang Yonggan, secretary general of the China Electricity Council, thinks the first two quarters of this year may be the hardest time and may continue to see negative growth. Power demand in the whole nation, especially in coastal areas, may see positive growth in the third quarter, which, it is hoped, will promote power consumption growth in the middle and west of China in the fourth quarter.

Stress Test Capital Requirements vs. Total Assets

Not sure of the accuracy of this, but Calculated Risk has a scorecard of stress test results / leaks to date. Here are those entities that need to scare up some tangible common equity as a percent of total assets.



Those entities that they have listed as not needing capital include:

• American Express
• Bank of New York Mellon
• Goldman Sachs
• JPMorgan Chase
• MetLife
• Morgan Stanley

Underwater Houses

Interest Rate Roundup details:

Zillow.com is out with the firm's latest report on "upside down" homeowners -- those who owe more than their homes are worth. The real estate data company estimates that 21.8% of U.S. homeowners are now underwater on their mortgages, up from 17.6% in the fourth quarter of 2008.

One unfortunate example is San Diego:

The average purchaser of a home in the area between 2004-2007 is underwater by an average amount of $40-$80,000.

The result is of course foreclosures, which led to the "improvement" in existing home resales.

ADP Employment Report Shows Improvement

Marketwatch details:

Private-sector employment in the United States fell by 491,000 jobs in April, according to the ADP employment index released Wednesday. The March number was revised higher to a decline of 708,000 from a decline of 742,000. The index comes two days before the government releases its estimate of April nonfarm payrolls. Economists are looking for payrolls to drop by 580,000 in the government survey, which would be the smallest decline since October.

Source: ADP

A Home on the Cheap(er)

SF Gate reports:

Rates on 30-year mortgages fell slightly last week but remained just ahead of record lows posted this month, Freddie Mac said Thursday.
Real Estate

Average rates on 30-year fixed mortgages dipped to 4.8 percent from 4.82 percent the previous week, Freddie Mac said. Last year at this time, the average rate on a 30-year mortgage was 6.03 percent. It has been below 5 percent for six straight weeks.

The all-time low of 4.78 percent was recorded the week of April 2. Freddie Mac's survey dates back to 1971.

Freddie Mac also said the average rate on a 15-year fixed-rate mortgage was 4.48 percent last week, unchanged from the previous week.

Rates on five-year adjustable-rate mortgages fell to 4.85 percent from 4.88 percent - the lowest since Freddie Mac began tracking it in January 2005.

The below chart shows the importance of these low rates... a reduced mortgage payment. Assuming a $160,000 loan (a $200,000 home with 20% down), the monthly payment has now dropped to a little more than $850 per month, down from $1000 last Fall.



Source: Freddie Mac

Hedge Fund Rebound Continues

April



YTD Through April



Source: Barclay Hedge

ISM Services: Contracting at Slower Rate

Business Wire details:

“The NMI (Non-Manufacturing Index) registered 43.7 percent in April, 2.9 percentage points higher than the 40.8 percent registered in March, indicating contraction in the non-manufacturing sector for the seventh consecutive month, but at a slower rate. The Non-Manufacturing Business Activity Index increased 1.1 percentage points to 45.2 percent. The New Orders Index increased 8.2 percentage points to 47 percent, and the Employment Index increased 4.7 percentage points to 37 percent. The Prices Index increased 0.9 percentage point to 40 percent in April, indicating a slightly slower decrease in prices from March. According to the NMI, seven non-manufacturing industries reported growth in April. Respondents’ comments are mixed and they vary by company and industry about economic conditions.”

Source: ISM

The New "Distressed" Assets

The Good: S&P 500 Up on the Year; The Bad: Back to 1997 Levels

Reuters details:

U.S. stocks rallied on Monday, driving the S&P 500 into positive territory for the year as investors bet banks' capital shortfalls may be manageable and housing data fueled hopes the recession is easing.

The S&P 500 is now up 34 percent from its 12-year closing low on March 9. The KBW Bank index .BKX leaped nearly 15 percent and is up 88 percent since early March when many thought the government was on the brink of nationalizing several big banks.

While the rebound is nice (and promising), lets put it all in a little perspective before we get too far ahead of ourselves...



Source: Yahoo