Market Points Lower after Dismal Housing Starts Report
But U.S. futures are slipping Wednesday. Earnings from FedEx met expectations for last quarter, but future revenue fell short and housing data was a bust.
Housing starts were just released and the numbers were worse than expected. Starts fell 10 percent to a 593,000 annual rate in May, the lowest level this year. Also worrisome: building permits, a sign of future construction, unexpectedly declined to a one-year low. We shouldn't have been surprised after yesterday's plunge in the NAHB homebuilder index, but worries are mounting that the housing market could see a rough second half of the year, which could prompt yet another tax credit to be enacted.
The Producer Price Index, a measure of inflation on the wholesale level, fell 0.3 percent, while the core rate, which excludes food and fuel, increased by 0.2 percent. Investors watch the PPI to see if there are any signs that producers could pass on rising costs to consumers.
Industrial Production data will be released, with forecasts ranging from a 0.8 percent-1 percent increase in May, while capacity utilization is expected at 74.5 percent.
In the category of "I'm shocked, shocked to find that gambling is going on here!": the Office of Congressional Ethics is investigating eight lawmakers who held fundraisers within 48 hours of a major House vote on regulatory reform or received substantial donations from business people with a financial stake in the bill.
Regulatory reform wimp-out move of the day: Chris Dodd and Barney Frank stripped out any meat from ratings agency reform legislation. So maybe Warren Buffett is right: while companies like Moody's, Fitch and S&P are cash cows, investors would be wise to do like Warren and ignore the ratings.
(CBS)
Jill Schlesinger is the Editor-at-Large for CBS MoneyWatch.com. Prior to the launch of MoneyWatch, she was the Chief Investment Officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.
How German History Shapes Obama-Merkel Rift
(AP Photo/Gero Breloer)
Mr. Obama, of course, has pushed through a massive stimulus package and pressed for greater government spending worldwide to end the recession. Merkel, who helms the largest economy in Europe, has resisted such spending; her government has passed only a pair of small stimulus packages in response to the economic crisis.
One reason for the two leaders' different philosophies is ideological: Merkel is a center-right politician who has argued against bank bailouts in Europe. But German history is also a factor. Under the German parliamentary governmental system known as the Weimar Republic, Germans faced hyperinflation in the 1920s that destroyed savings and drove many people into poverty. Here's one (fictionalized) account of what it was like:
The price increases began to be dizzying. Menus in cafes could not be revised quickly enough. A student at Freiburg University ordered a cup of coffee at a cafe. The price on the menu was 5,000 Marks. He had two cups. When the bill came, it was for 14,000 Marks. "If you want to save money," he was told, "and you want two cups of coffee, you should order them both at the same time."The Weimar Republic stayed in power in Germany for another decade, but the period of hyperinflation is considered a significant factor in the emergence of the National Socialist German Workers' Party – the Nazis.
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Investors Rebuke Feds: Get Ready For Higher Interest Rates
(AP Photo/Susan Walsh)
The plan dreamed up by the Obama administration and the Federal Reserve for an economic recovery included a big bet: that interest rates would remain extremely low. That would, they hoped, spur borrowing and lending, encourage mortgage refinancing, and even lend support to housing prices.
We're already seeing signs that this bet may not pay off. One came on Wednesday, when long-term interest rates hit a high for the year when investors forced the Treasury Department to offer higher interest rates. Another may come on Thursday afternoon if investors remain leery of the Treasury's attempt to auction 30-year bonds.
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Inflation Could Be Coming To A U.S. Dollar Near You
(iStockphoto)
Fed Chairman Ben Bernanke told CBS News in March that he saw "green shoots" of economic recovery beginning to sprout, including in mortgages and business lending.
Now it seems like those "green shoots" that were beginning to appear may have been rooted in inflation.
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