Saturday, April 28, 2007
Bad Data - Microsoft to the Rescue!
A bad day economically on Friday but the Dow still gained and the SPX fell just 0.18 to end the day on 1,494.07. The probable reason for the gains in the Dow was because Microsoft posted strong results on the back of its Vista software.
The advanced reading for GDP was a problem on two fronts. First, growth came in at 1.3 percent, well below estimates for growth of 1.7 percent. Second, inflation pressures were strong, rising four percent during the quarter. GDP growth is at its lowest point in four years, but the Fed can’t cut rates because of pricing pressures. The Fed is therefore stuck between a rock and a hard place, so the most likely result is that the Fed will sit on the sidelines and see how things work out.
Inflation pressures have been rising mostly due to higher energy prices. Crude rallied $1.40 a barrel Friday to close at $66.46 (up over 3% for the week). High oil prices continued due to concerns about supply given the expected rise in demand during the summer holiday months.
A tight labor market has been a concern for the Fed as well with employment costs rising 0.8 percent during the first quarter. This was a tenth below expectations and put growth this past week at 3.5 percent. This is the first year on year growth in two years. Of course, we will get more on the labor market next week when the monthly employment report is released.
As for our play, we are still in no rush. Lets see what happens over the next few days next week.
Until next time.
The advanced reading for GDP was a problem on two fronts. First, growth came in at 1.3 percent, well below estimates for growth of 1.7 percent. Second, inflation pressures were strong, rising four percent during the quarter. GDP growth is at its lowest point in four years, but the Fed can’t cut rates because of pricing pressures. The Fed is therefore stuck between a rock and a hard place, so the most likely result is that the Fed will sit on the sidelines and see how things work out.
Inflation pressures have been rising mostly due to higher energy prices. Crude rallied $1.40 a barrel Friday to close at $66.46 (up over 3% for the week). High oil prices continued due to concerns about supply given the expected rise in demand during the summer holiday months.
A tight labor market has been a concern for the Fed as well with employment costs rising 0.8 percent during the first quarter. This was a tenth below expectations and put growth this past week at 3.5 percent. This is the first year on year growth in two years. Of course, we will get more on the labor market next week when the monthly employment report is released.
As for our play, we are still in no rush. Lets see what happens over the next few days next week.
Until next time.
# posted by Paul @ 3:31 PM 
