U.S. and World News
- Liquidity concerns cropped up in China this week as the People’s Bank of China allowed short-term lending rates to spike in a move interpreted as an attempt to rein in the country’s ballooning lending market. The PBOC stepped in later in the week to ease the credit crunch that it had engineered, saying it has provided liquidity to banks and that it will inject cash based on the market’s actual situation. This is another example of the increased effect central banks are having on market volatility.
- The White House has reportedly begun assembling a list of candidates to replace Ben Bernanke as the Federal Reserve Chairman. This comes as no surprise following President Obama’s “firing” of Bernanke last week. There is no clear front runner but many believe that Fed Vice-Chair Janet Yellen may be the favorite, while Larry Summers and Timothy Geithner may also be in the running.
- Stock markets rebounded a bit as the S&P 500 Index rose 0.85%, closing at 1,606. The Dow Jones Industrial Average was up 0.72% to close at 14,909. After this week’s bounce, the S&P and the Dow were up 2.36% and 2.27% respectively for the 2nd quarter and up 12.6% and 13.8% year to date.
- Treasury yields fell back down a bit this week after their rapid climb higher as several Fed officials this week tried to soothe the bond market’s fears regarding tapering of asset purchases. The 5 year and 10 year treasury finished the week at 1.40% and 2.49% respectively.
- The spot price of WTI Crude Oil rose this week, increasing by 3.0%, closing at $96.52 per barrel. For the 2nd quarter, oil prices were down 1.0% and on the year, they are down 2.9%.
- The spot price of Gold continued its nose dive this week, dropping by 4.9% and closing at $1,232.55/ounce. Gold was down 22.8% for the 2nd quarter and is down 26.4% this year.
- Weekly Initial Jobless Claims fell this week as claims decreased by 8,000 and came in in-line with expectations at 346,000. The 4-week moving average of jobless claims moved down to 346,000.
- Personal Consumption Expenditure prices, the measure of inflation the Federal Reserve uses for its policy targets rose 0.1% last month. Over the last 12 months, PCE has risen 1.0%, continuing the subdued inflation well below the Fed’s 2.0% target for altering policy.
- The Case-Shiller home price index rose more than expected in April, seeing gains of 1.7% month over month. On a year over year basis, the home price index is up over 12%.
- New Home sales also beat expectations, rising by 2.1% in May vs. consensus expectations of 1.3%. Sales increased in the Northeast, Midwest and West regions.
Fact of the Week
- According to Moody’s, U.S. states have a combined pension shortfall of $980 billion, or the equivalent of 66% of their income from taxes collected on average, including money from federal block grants and aid. Nebraska has the smallest gap relative to their revenue with a shortfall of 7%. Illinois, not surprisingly, has the largest hole with a shortfall of 141% of the state’s revenue.
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