- Fed watchers got plenty of information to digest this week as minutes from the latest policy meeting were released and Chairman Ben Bernanke gave testimony to Congress. The minutes showed that a number of members are prepared to slow down the Federal Reserve’s bond buying as early as June if economic conditions continue to improve. Meanwhile, Bernanke appeared to talk out of both sides of his mouth by first saying that premature tightening of policy posed a significant risk to the economic recovery but then later saying that the Fed could begin to dial down purchases at one of the next few meetings.
- The latest Senior Loan Officer Opinion Survey cited increased competition among banks which has led to easing of lending standards on business loans over the last three months, as razor thin margins (due to historically low interest rates) have created a scramble for Commercial and Industrial business. The survey also showed that business loans extended rose 10% year over year to a total of $1.55 trillion.
- Stock markets drifted down a bit this week with the S&P 500 Index falling 1.1%, closing at 1,650. The Dow Jones Industrial Average also fell and was down 0.3% to close at 15,303. After this week’s dip, the S&P and the Dow are up 15.7% and 16.8% year to date respectively.
- Treasury yields continued to drift higher again this week, as the 5 year and 10 year treasury finished the week at 0.89% and 2.01% respectively.
- The spot price of WTI Crude Oil dropped this week, falling by 2.5%, closing at $93.89 per barrel. On the year, oil prices are up 0.2%.
- The spot price of Gold recovered a bit this week after last week’s plunge, rising by 1.8% and closing at $1384.64/ounce. Even with the gains, gold is down 17.3% for the year.
- Weekly Initial Jobless Claims fell this week after last week’s unexpected spike. Claims fell by 23,000 and came in lower than expected at 340,000 vs. consensus expectations of 345,000. The 4-week moving average of jobless claims moved up to 340,000. The Labor Department noted that there was nothing unusual in the claims data but the state-level reports showed a large 15K spike in claims in California due to layoffs in the service industry.
- Manufacturing activity is shrinking in China as its PMI fell into contraction territory for the first time in seven months. Slower domestic demand and a sequential slowdown in the second quarter is seen as putting China’s fragile growth recovery at risk.
Fact of the Week
- Medicare enrollment is projected to rise from 52 million in 2013 to 66 million in 2021, an increase of 27% more people over the next eight years. Medicare expenditures over the same eight years are projected to rise from $598 billion in 2013 to $1 trillion in 2021, an increase of 67%, highlighting the rapidly rising cost of healthcare.
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