Crude Oil Closes Modestly Higher, Monday, June 02, 2008 3:34:53 PM
Oil closed another choppy session mildly higher for the day. Light sweet crude for July delivery ended the session at $127.76 per barrel, up 41 cents on the session. Crude touched as low as $125.22 in electronic movement but later rallied to as high as $129.35.
Crude has been very uncertain over the last few sessions as it moved away from a record high of $135.09 in mid-May. Crude added 73 cents in a volatile Friday session. July crude oil added nearly $15 in the month of May.
The hurricane season officially got underway on Sunday. Tropical Storm Arthur caused three crude oil ports in Mexico to close for shipping on Sunday. However, the storm dissipated to a depression on Monday without causing damage to oil regions in the Gulf of Mexico.
Traders will closely watch the weekly inventory report on Wednesday. According to last week`s data, inventories were down 8.88 million barrels, much more than expected. But the EIA said the drop was due to temporary delays in crude oil tanker off-loadings on the Gulf Coast. On the data, crude oil for July delivery prices surged as high as $133.12 after the 10:30 a.m. ET report, but gave back its gains within about 30 minutes and closed sharply lower.
Stochastics and the RSI remained neutral for July crude oil. Psychological resistance may be found at $135 as prices slipped lower after crossing that mark briefly last week. Friday`s low crossing of $124.67 could serve as support.
Activity in the U.S. manufacturing sector shrank for the fourth consecutive month in May, according to a report released by the Institute for Supply Management on Monday, although the pace of contraction slowed compared to the previous month. The ISM said its index of activity in the manufacturing sector rose to 49.6 in May from 48.6 in April, although a reading below 50 indicates a contraction in the sector. Economists had been expecting the index to edge down to about 48.5.
Also Monday morning, a Department of Commerce report showed that construction spending fell 0.4 percent in April following a revised 0.6 percent decrease in March. Economists had expected spending to fall 0.6 percent compared to the 1.1 percent decrease originally reported for the previous month.
Dollar Back Above Par Versus Loonie, Mixed Versus Other Majors, Monday, June 02, 2008 2:35:50 PM
The dollar was mixed against other major currencies on Monday in New York as an Institute for Supply Management report showed that U.S. factory activity contracted in May for the fourth consecutive month.
The buck jumped back above par versus the loonie and firmed up on the sterling while hitting the skids against the broadly stronger yen.
Monday morning, the ISM said its index of activity in the manufacturing sector rose to 49.6 in May from 48.6 in April, although a reading below 50 indicates a contraction in the sector. Economists had been expecting the index to edge down to about 48.5.
The unexpected increase by the index was partly due to a rebound in production, with the production index jumping to 51.2 in May from 49.1 in April. The increase lifted the production index above the key 50 level.
The buck rallied back above parity versus the loonie for the first time since May 15, rising about a cent to 1.003. The dollar`s advance was fueled by data showing that Canadian consumer confidence fell to its lowest point since 2001. The board said its consumer confidence index dropped seven points to 85.8 in May.
The dollar also gained on the sterling, hitting a nearly 2-week high of 1.9595 in very early dealing before leveling of to trade at 1.9650 by mid-day.
The number of mortgage approved for house purchases in the UK stood at 58,000 in April, the Bank of England reported Monday. Mortgage approvals fell from March`s 63,000 and 65,000 expected by economists. Net lending secured on dwelling rose GBP6.4 billion compared with GBP6.7 billion in the prior month.
The dollar fell sharply versus the yen on Monday, dropping to 104 from 105 as risk aversion caused traders to flock to the lower-yielding Japanese currency. With the loss, the buck moved further away from last Thursday`s 3-month high near 106.
The buck was little changes in choppy dealing against the euro on Monday, bouncing back and forth between 1.55 and 1.56 for most of the day.
The Royal Bank of Scotland and NTC Economics revealed that Eurozone`s PMI for manufacturing sector fell to 50.6 in May from 50.7 in April -- its lowest level since 2005. However, the reading stood above the flash reading of 50.5.
Gold Climbs Towards $900, Monday, June 02, 2008 2:35:24 PM
Gold prices closed moderately higher on Monday after topping the $900 mark earlier in the session. August-stamped gold futures ended the session at $897 an ounce, up $5.50 on the session. The metal touched as high as $901.20 in the mid-morning.
The precious metal added to its gains from Friday, when it added $9.80 on the session. The metal moved further away from a multi-week low of $873.00, reached last week. For the month of May, gold closed higher by 2.5% or $22.10 an ounce. Last week, the precious metal dropped $39.10, after climbing sharply in the previous week.
The metal dropped to its lowest close in more than two weeks on Thursday, pushed lower by a stronger dollar. The greenback was mixed against other major currencies Monday morning in New York. The buck moved higher versus the sterling while coming under a bit of pressure versus the yen. The dollar was little changed against the euro.
The ISM said its index of activity in the manufacturing sector rose to 49.6 in May from 48.6 in April, although a reading below 50 indicates a contraction in the sector. Economists had been expecting the index to edge down to about 48.5.
Also Monday morning, a Department of Commerce report showed that construction spending fell 0.4 percent in April following a revised 0.6 percent decrease in March. Economists had expected spending to fall 0.6 percent compared to the 1.1 percent decrease originally reported for the previous month.
Oil was slightly higher on Monday afternoon amid further volatile trading. Light sweet crude for July delivery moved to $127.78 per barrel, up $43 cents on the session. Crude touched as low as $125.22 in electronic movement but later rallied to as high as $129.18.
Economic Round Up -- ISM Manufacturing Data Raises Stagflation Fears, Monday, June 02, 2008 1:04:36 PM
A busy week of economic news was kicked off on Monday with an ISM report showing U.S. factory activity contracted in May for the fourth consecutive month and the pace of price growth accelerated to its highest in four years.
The ISM said its index of activity in the manufacturing sector rose to 49.6 in May from 48.6 in April, although a reading below 50 indicates a contraction in the sector. Economists had been expecting the index to edge down to about 48.5.
The unexpected increase by the index was partly due to a rebound in production, with the production index jumping to 51.2 in May from 49.1 in April. The increase lifted the production index above the key 50 level.
However, concerns about stagflation were raised when the ISM said that the pace of price growth continued to accelerate in May, with the prices index jumping to 87.0 from 84.5 in the previous month.
The ISM is due to provide some additional economic data on Wednesday with the release of its report on activity in the service sector. Economists expect the index of activity in the service sector to edge down to 51.0 in May from 52.0 in April.
Also Monday morning, the Department of Commerce released its report on construction spending in the month of April, showing that construction spending decreased by a little less than economists had been anticipating.
The report showed that construction spending fell 0.4 percent in April following a revised 0.6 percent decrease in March. Economists had expected spending to fall 0.6 percent compared to the 1.1 percent decrease originally reported for the previous month.
North of the border, the Conference Board of Canada said that Canadian consumer confidence fell to its lowest point since 2001. The board said its consumer confidence index dropped seven points to 85.8 in May.
Across the Atlantic, Purchasing Managers` Index data for the manufacturing sector of various European economies dominated the scene.
Euro zone`s Purchasing Managers` Index for manufacturing sector declined to the lowest level since August 2005. The Royal Bank of Scotland and NTC Economics revealed that Eurozone`s PMI for manufacturing sector fell to 50.6 in May from 50.7 in April. However, the reading stood above the flash reading of 50.5. The May reading was the lowest since August 2005.
Meanwhile, the number of mortgage approved for house purchases in the UK stood at 58,000 in April, the Bank of England reported Monday. Mortgage approvals fell from March`s 63,000 and 65,000 expected by economists. Net lending secured on dwelling rose GBP6.4 billion compared with GBP6.7 billion in the prior month.
Paulson Says U.S. Still Committed To Strong Dollar Policy, Monday, June 02, 2008 10:59:39 AM
The `very real` challenges facing the U.S. economy took center stage Monday as Treasury Secretary Henry Paulson spoke before the U.S.-UAE Business Council, reaffirming his commitment to a strong dollar policy.
`As you know, the U.S. economy is going through a rough period,` Paulson told the council during a speech in Abu Dhabi. `We are facing a trio of headwinds - a housing correction, capital markets turmoil and high and rising energy prices.`
Paulson delivered the speech at a wrap up of his four-day visit to the Persian Gulf, where he outlined U.S. efforts to deal with recent market turmoil in the housing and credit markets. One of the major sources of capital for struggling financial institutions during the credit crunch came from the oil-rich countries in the Middle East. U.S. companies raised billions in capital as Middle Eastern companies increased their investments. Paulson assured the council that the U.S. remains open for business and would welcome investments, despite some opposition in recent years from U.S. lawmakers.
`I have met with many leaders from the Middle East who ask if the United States really continues to welcome foreign investment,` Paulson said `As we seek to open new markets abroad, America will keep our markets open at home to investment from private firms and from sovereign wealth funds.`
Oil was also part of Paulson`s focus. Prices have nearly doubled in the last year, hitting a record high of $135.09 a barrel last week. One of the culprits often cited for soaring oil prices is a weak U.S. dollar, a factor that Paulson has continually dismissed. Rather, he cites supply and demand market forces as the chief reason oil has soared to these record highs.
`There are no simple or quick remedies for this, and let me be clear in stating that the Gulf region alone cannot alleviate the pressures in global oil markets,` the Treasury Secretary said. `Speculation and the depreciation of the dollar are likely only small factors behind oil price increases.`
He called on oil-producing countries to use this `historic opportunity` of sky-high oil prices to boost foreign investment.
`We are urging all oil-producing countries to open markets to foreign investment, which would support faster and more efficient growth,`` he said.
Paulson stressed that he remains committed to a strong dollar policy.
`The U.S. dollar has been the world`s reserve currency since World War II and there is a good reason for that,` he said. `The long-term health and strong underlying fundamentals of the U.S. economy will shine through and be reflected in currency values.`
Paulson remained very positive about the long-term prospects for the U.S. economy.
`Overall, I believe that the United States is on the right path to resolving market disruptions and building a stronger financial system,` he said. `Our long term prospects remain strong.`
While the Bush administration has continually stressed that it believes in a strong dollar policy, the value of the dollar has declined for much of Bush`s presidency, hitting record lows against the euro in April.
Construction Spending Falls Less Than Expected In April, Monday, June 02, 2008 10:54:15 AM
Monday morning, the Department of Commerce released its report on construction spending in the month of April, showing that construction spending decreased by a little less than economists had been anticipating.
The report showed that construction spending fell 0.4 percent in April following a revised 0.6 percent decrease in March. Economists had expected spending to fall 0.6 percent compared to the 1.1 percent decrease originally reported for the previous month.
With the relatively modest monthly decrease, construction spending in April was down 3.9 percent compared to the same month last year.
The monthly decrease was partly due to a 0.5 percent drop in spending on private construction, which came as a 2.3 percent decrease in spending on residential construction more than offset a 1.6 percent increase in spending on non-residential construction.
Spending on public construction also saw some weakness in April, edging down 0.3 percent compared to the previous month. Spending on educational construction fell 0.3 percent, while spending on highway construction edged up 0.1 percent.
The Commerce Department added that construction spending totaled $331.6 billion in the first 4 months of the year, 2.8 percent below the $341.2 billion for the same period in 2007.
ISM Manufacturing Index Increases But Continues To Indicate Contraction, Monday, June 02, 2008 10:36:34 AM
Activity in the U.S. manufacturing sector shrank for the fourth consecutive month in May, according to a report released by the Institute for Supply Management on Monday, although the pace of contraction slowed compared to the previous month.
The ISM said its index of activity in the manufacturing sector rose to 49.6 in May from 48.6 in April, although a reading below 50 indicates a contraction in the sector. Economists had been expecting the index to edge down to about 48.5.
The unexpected increase by the index was partly due to a rebound in production, with the production index jumping to 51.2 in May from 49.1 in April. The increase lifted the production index above the key 50 level.
Strength in exports also contributed to the slowdown in the pace of contraction in the sector. The exports index rose to 59.5 in May from 57.5 in April.
`Exports continue strong due to the weak dollar,` said Norbert J. Ore, C.P.M., chair of the ISM Manufacturing Business Survey Committee. `Without the weak dollar the story would be much more negative in manufacturing.`
New orders also saw some improvement compared to the previous month, although the new orders index remained below 50. The index rose to 49.7 in May from 46.5 in April.
At the same time, the report showed continued weakness in employment, as the employment index was nearly unchanged at 45.5 in May compared to 45.4 in the previous month.
Additionally, the ISM said that the pace of price growth continued to accelerate in May, with the prices index jumping to 87.0 from 84.5 in the previous month.
Ore noted, `Manufacturers find themselves caught between rising costs and weakening demand in many industries.`
The ISM is due to provide some additional economic data on Wednesday with the release of its report on activity in the service sector. Economists expect the index of activity in the service sector to edge down to 51.0 in May from 52.0 in April.
Dollar Mixed Versus Other Majors Ahead of Key Manufacturing Data, Monday, June 02, 2008 7:11:09 AM
The dollar was mixed against other major currencies Monday morning in New York, racing higher versus the sterling while coming under a bit of pressure versus the yen.
The Institute for Supply Management issues its monthly report on manufacturing activity at 10 a.m. ET. Economists expect the ISM to tick lower to a reading of 48.5, down from April`s level of 48.6.
Market players received a prelude to the ISM report on Friday when Chicago PMI came in better-than-expected at 49.1 in May from a reading of 48.3 in April, beating expectations that it would rise only to 48.5. The gauge of mid-western manufacturing stayed below growth levels for the fourth consecutive month, but has crept closer to the 50-level for the last three months.
The dollar was little changed against the euro Monday morning in New York, moving in a narrow range near 1.5550. The dollar saw strong gains last week against the euro amid speculation the European Central Bank would soon cut interest rates to combat economic weakness.
According to NTC Economics, the German purchasing managers` index for manufacturing remained unchanged at 53.6 in May. Economists had expected a slight fall to 53.5, in line with the preliminary estimate in May.
On the flip side, overall euro zone PMI manufacturing figure fell to a record low 50.6 following the previous month`s 50.7 reading. Still, the May reading came in slightly better than consensus forecast of 50.5.
The greenback raced higher versus the sterling Monday morning, rising more than a cent to hit a 2-week high of 1.96.
The number of mortgage approvals for house purchases in the UK stood at 58,000 in April, the Bank of England reported Monday. Mortgage approvals fell from March`s 63,000 and 65,000 expected by economists. Net lending secured on dwelling rose GBP6.4 billion compared with GBP6.7 billion in the prior month.
The dollar lost a bit of ground Monday morning versus the yen as US stock futures tumbled, fueling risk aversion. The greenback slipped to 104.65 in very early dealing, but was stable approaching mid-morning.
According to official data released Friday, the Japanese unemployment rate grew slightly more than expected to 4% in April, up from the 3.8% rate in March.
US stocks facing headwinds Monday morning ahead of ISM manufacturing report, Monday, June 02, 2008 6:37:26 AM
US stocks were poised for a rough open Monday morning in New York ahead of a busy week on the economic front, including today`s ISM report on manufacturing activity.
As of 6:15 am ET, the S&P Futures were down 7 points, the NASDAQ Futures were down 8 points, and the Dow Futures were down 69 points.
The Institute for Supply Management issues its monthly report on manufacturing activity at 10 a.m. ET. Economists expect the ISM to tick lower to a reading of 48.5, down from April`s level of 48.6.
Later in the week on Friday, nonfarm payrolls are expected to show their fifth straight decline, with a loss of 60,000 jobs in May, following April`s decline of 20,000.
The price of oil slipped back to $126 Monday morning amid speculation that US demand would continue to weaken. The dollar edged higher versus the euro in early dealing, rising to 1.5540.
In corporate news, the Financial Times reported that Cerberus Capital Management has sold `significantly` more than half its equity in Chrysler and GMAC to about 90 investors.
New York State Senator Hillary Rodham Clinton soundly won Sunday`s Puerto Rican Democratic Primary, taking 68 percent of the vote on the American commonwealth island. Still, the win may be too little, too late for Clinton. Senator Barack Obama is only 45.5 delegates short of cinching the nomination.
Swiss Franc Recovers From Lows Against Dollar And Pound, Friday, May 30, 2008 3:31:35 PM
The Swiss franc rose versus its major counterparts on Friday in New York, pulling up from early lows versus the sterling and the greenback.
The Swiss franc rebounded from an 11-day low against the dollar on Friday. After easing to 1.0526 by 3:30 am ET, the franc rose to 1.0424 in the afternoon.
Investors digested a US consumer sentiment index for May being unexpectedly raised upward and a report showing personal income and spending rose as expected in April.
Against the euro, the franc climbed away from Thursday`s 9-day low on Friday. The franc advanced to 1.6206 just before 3:00 pm ET, up from 1.6288 in the early morning.
Traders considered two reports showing Italian consumer prices rose more than expected in May.
Versus the pound on Friday, the franc recovered from a 3 1/2-week low. After slumping to 2.0783 around 3:30 am ET, the franc rallied to 2.0639 in the mid-afternoon.
Investors mulled the Swiss May KOF leading index falling in line with expectations.
Loonie Dips Versus Major Counterparts, Friday, May 30, 2008 2:36:12 PM
The loonie slid against the euro and greenback on Friday in New York. The slip came as traders weighed a report showing the Canadian economy contracted unexpectedly during the first-quarter of 2008.
The report showed that Canadian GDP edged down 0.1 percent in the first quarter after a 0.2 percent increase in the fourth quarter. GDP fell by 0.2 percent in March following a 0.3 decrease in February and a 0.6 percent increase in January.
This was the first contraction since the second quarter of 2003. The weakness was partly due to widespread cutbacks in manufacturing.
The Canadian dollar fell to an 11-day low versus the US dollar on Friday. The loonie dropped to .9978 by 8:30 am ET, before paring its gains later in the day reaching .9934 in the afternoon.
Investors pondered a US consumer sentiment index for May being unexpectedly raised upward and a report showing personal income and spending rose as expected in April.
The loonie retreated from Thursday`s 2 1/2-month high against the euro on Friday. The Canadian dollar declined to 1.5489 just before Noon ET, down from 1.5307 in the early morning.
Traders digested two reports showing Italian consumer prices rose more than expected in May.
Dollar Mixed Versus Other Majors As Data Reveals Consumer Distress, Friday, May 30, 2008 2:14:35 PM
The dollar was mixed in choppy dealing versus a basket of majors currencies on Friday, ending a positive week versus the euro by giving back some its gains. The dollar came under a bit of pressure versus the sterling, but was able to advance versus its Canadian counterpart.
Traders sifted through a mixed bag of economic data, highlighted by the release of a pair of reports on the struggling US consumer.
The Department of Commerce released its closely watched report on personal income and spending in the month of April, showing modest increases in both income and spending that came in line with economists` expectations.
The report showed that personal income edged up 0.2 percent in April following a revised 0.4 percent increase in March.
Meanwhile, US consumer sentiment fell to a 28-year low in the month of May, but was unexpectedly revised upwards from a previous reading, according to a report released by Reuters and the University of Michigan.
The consumer sentiment index for May was revised up to 59.8 from the previously reported reading of 59.5. The upward revision came as a surprise to economists, who had expected the index to be unrevised.
The dollar fell from a 2-week high against the euro, ending a 3-day winning streak after higher-than-expected Eurozone inflation numbers and hawkish rhetoric from an ECB official fueled speculation that policy makers may stand pat on interest rates for at least another month. The buck dropped to 1.5560 versus the euro, down a penny from its overnight high.
Euro zone annual inflation grew 3.6% in May, according to preliminary estimates from Eurostat. Economists had expected a reading of 3.5%, up from April`s 3.3% growth rate.
The buck extending its run of uncertain dealing versus the sterling on Friday, rising to 1.97 before falling below 1.98 by mid-afternoon.
The dollar held steady versus the yen, staying near a three-month high of 105.87 from the previous session. The dollar challenged that mark in morning action, but leveled off to 105.40 by mid-day.
The dollar rallied versus the loonie on Friday, but failed to rise above parity before falling back. After data showed that Canada`s economy unexpectedly contracted 0.1 percent in the first quarter, the dollar surged to .9980 but from there pared its gains to trade near .9930 for the rest of the day.
Fed`s Rosengren Says Weak Housing Market Complicates Economic Outlook, Friday, May 30, 2008 1:40:32 PM
The `continued downside risk` of falling home prices was the focus of a speech by Boston Federal Reserve President Eric Rosengren on Friday. Rosengren noted that residential investment would likely decline this quarter, making it the tenth consecutive quarter of decline and clouding the economic outlook for the U.S. economy.
`This has been an unusually long period of continuous decline in the housing sector, and coupled with falling housing prices nationally, has complicated predictions of what will happen in the economy going forward,` Rosengren told the New England Economic Partnership.
He linked the length of decline of housing prices to the economic outlook. Rosengren praised `aggressive` monetary and fiscal policy actions by the Federal Reserve and other agencies as keeping the fallout from the financial turmoil `relatively benign.`
`These policies will likely result in some pick up in economic activity in the second half of this year, which should help to stabilize the housing market,` the Boston Fed President predicted.
Continued economic turmoil, especially combined with a rising unemployment rate could result in further deterioration of the housing market, Rosengren warned.
`Should the economy worsen and suffer a period of significant job losses, the housing problem could become much more severe,` he noted.
He added that, based on past events, the high foreclosure rate that the markets are currently weathering `may be longer than some are anticipating.`
Based on research by economists at the Boston Federal Reserve Branch, Rosengren said, `Less than 10 percent of…homeowners with negative equity will default.` However, this number could increase if a myriad of factors, including declining home prices, increased unemployment, and a propensity towards defaulting on home mortgages.
`It is clear that servicers were not set up for the spate of elevated foreclosures we have already experienced, and further increases in foreclosures would certainly test the capacity of servicers to have sufficient staff with the expertise to make loan modification determinations,` Rosengren said, referring to the challenges facing those working towards loan modifications.
He added, `Nonetheless, I am hopeful that the many mortgage forums that are being organized around the country to try to get servicers and borrowers together to work with problem loans will help some borrowers.`
Economic Round Up -- Consumer Spending Slows, Sentiment At 28-Year Low, Friday, May 30, 2008 12:38:46 PM
Friday was a hectic day on the economic front, featuring key reports from both sides of the Atlantic, including a pair of readings on the health of the US consumer.
Before the opening bell, the Department of Commerce released its closely watched report on personal income and spending in the month of April, showing modest increases in both income and spending that came in line with economists` expectations.
The report showed that personal income edged up 0.2 percent in April following a revised 0.4 percent increase in March. Economists had expected income to increase by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month. Economist pointed out that some of the spending increases came as consumers cashed stimulus checks from the government.
The consumer remained in focus with the release of data showing US consumer sentiment in the month of May was unexpectedly revised upwards from a previous reading, according to a report released by Reuters and the University of Michigan. Still, optimism was tempered as analysts pointed out the consumer sentiment index was still at a 28-year low.
The report showed that the Reuters/University of Michigan consumer sentiment index for May was revised up to 59.8 from the previously reported reading of 59.5. The upward revision came as a surprise to economists, who had expected the index to be unrevised.
In a prelude to Monday`s ISM Manufacturing data, the Chicago PMI came in better-than-expected at 49.1 in May from a reading of 48.3 in April, beating expectations that it would rise only to 48.5. The gauge of mid-western manufacturing stayed below growth levels for the fourth consecutive month, but has crept closer to the 50-level for the last three months.
Friday`s news from the Eurozone did little to provide hints about the direction of the next European Central Bank rate decision. The ECB next meets in June, and analysts are divided as to whether the central bank will cut interest rates in the face of a slowing economy.
Official data revealed German retail sales slipped last month, suggesting that economic weakness was is taking hold in Europe. However, higher than expected inflation numbers and hawkish rhetoric from an ECB official fueled speculation that policy makers may stand pat on interest rates for at least another month.
The Federal Statistics Office reported that German retail sales fell 1.7% in April month-over-month. Economists had expected a 0.6% rise following the previous month`s 2.2% decline.
Meanwhile, Euro zone annual inflation grew 3.6% in May, according to preliminary estimates from Eurostat. Economists had expected a reading of 3.5%, up from April`s 3.3% growth rate.
ECB council member Axel Weber ramped up his inflation-fighting rhetoric, saying that changing the ECB`s definition of price stability would risk the bank`s credibility at a time when fighting inflation is of the essence.
Consumer Sentiment Index For May Revised Up To 59.8, Friday, May 30, 2008 11:06:19 AM
Consumer sentiment in the month of May was unexpectedly revised upwards from a previous reading, according to a report released by Reuters and the University of Michigan on Friday, although the consumer sentiment index was still at a nearly 28-year low.
The report showed that the Reuters/University of Michigan consumer sentiment index for May was revised up to 59.8 from the previously reported reading of 59.5. The upward revision came as a surprise to economists, who had expected the index to be unrevised.
Despite the upward revision, however, the index remained well below the final April reading of 62.6 and was the lowest reading since hitting 58.7 in June of 1980.
Additionally, the report showed that the consumer expectations index fell to 51.5 in May from 53.3 in April, while the current index slipped to 73.3 from 77.0 in the previous month.
Reuters and the University of Michigan also said that the one-year inflation expectations index jumped to 5.2 percent in May from 4.8 percent in April. With the increase, the index rose to its highest level since February of 1982.
Personal Income And Spending Increase In Line With Estimates, Friday, May 30, 2008 9:04:15 AM
Friday morning, the Department of Commerce released its report on personal income and spending in the month of April, showing modest increases in both income and spending that came in line with economists` expectations.
The report showed that personal income edged up 0.2 percent in April following a revised 0.4 percent increase in March. Economists had expected income to increase by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.
The modest increase in personal income came even though private wage and salary disbursements decreased by $18.2 billion in April, in contrast to an increase of $26.9 billion in March.
The Commerce Department added that personal spending rose 0.2 percent in April after increasing by 0.4 percent in the previous month. The increase in personal spending also came in line with economist estimates of 0.2 percent growth.
With income and spending increasing at the same pace, personal saving as a percentage of disposable personal income was 0.7 percent in April, unchanged from March.
Additionally, the Commerce Department said its closely watched reading of core consumer prices, which excludes food and energy prices, edged up 0.1 percent in April compared to a 0.2 percent increase in March.
On an annual basis, core consumer prices were up 2.1 percent in April, unchanged from the annual rate of growth reported for the previous month.
While the annual rate of core consumer price growth is slightly above the Federal Reserve`s target of about 2.0 percent growth, the relatively tame inflation data may offset some of the concerns about the impact of rising commodity prices.
The modest increases in personal income and spending are also likely to add to recent indications that the economy will be able to weather the economic slowdown without slipping into a recession.
On Thursday, a separate Commerce Department report showed that first quarter gross domestic product growth was revised up to 0.9 percent from the 0.6 percent originally reported. The upward revision came in line with economist estimates.
With the upward revision, the GDP growth in the first quarter marks a modest acceleration from the 0.6 percent growth seen in the fourth quarter.
The relatively modest economic growth that was seen in the first quarter reflected positive contributions from consumer spending on services, exports of goods and services, federal government spending, and private inventory investment.
The growth was partly offset by negative contributions from residential fixed investment and consumer spending on durable goods.
The Commerce Department also noted that the small acceleration in GDP growth compared to the fourth quarter primarily reflected an upturn in inventory investment that was partly offset by a deceleration in consumer spending.
Dollar on Pause Versus Majors ahead of Consumer Spending, Chicago PMI, Friday, May 30, 2008 7:01:35 AM
The dollar leveled off against the euro and yen while extending a run of choppy trading versus the sterling as traders looked ahead to a slew of economic results from the US, including a key reading on personal consumption.
Traders will be treated to the Commerce Department`s report on personal income and spending for the latest on the mindset of the consumer. Other economic reports to consider include the Chicago PMI manufacturing survey and a revised reading on consumer sentiment from the University of Michigan.
The dollar pulled back a bit after hitting a 2-week high against the euro overnight, slipping to 1.5517 from 1.5461. The dollar has spiked higher against the euro this week amid speculation that creeping economic weakness in the eurozone will lead to a rate cut from the European Central Bank.
On Friday, the Federal Statistics Office reported that German retail sales fell 1.7% in April month-over-month. Economists had expected a 0.6% rise following the previous month`s 2.2% decline.
Euro zone annual inflation grew 3.6% in May, according to preliminary estimates from Eurostat. Economists had expected a reading of 3.5%, up from April`s 3.3% growth rate.
The dollar stretched to a fresh 3-month high of 105.85 versus the yen overnight, but eased slightly from there to trade at 105.40 approaching mid-morning. Japanese housing starts declined 8.7% year-on-year in April to 97,930 units, official data revealed Friday. This is smaller than the 15.6% fall in March. Economists were looking for an 11.8% slump in April housing starts.
Orders with Japan`s big 50 contractors dropped 8.4% year-on-year in April, while economists had forecasted a 16% fall. In March, construction orders were down 6.4%.
The dollar was little changed in choppy dealing against the sterling Friday morning, staying in a range between 1.97 and 1.98 through 7 am ET. The dollar has been moving roughly sideways versus the sterling this week, stabilizing from a multi-week low of 1.9850.
The dollar recovered most of its losses from the previous session versus the loonie, rising back to .99 from yesterday`s low near .9820. Even with the price of oil pulling back sharply from its record highs this week, the dollar has been unable to break above the parity line versus its Canadian counterpart.
US Stocks Look To Extend Gains Friday Morning, Friday, May 30, 2008 6:43:25 AM
US stocks were looking to end a relatively positive week on a high note Friday morning after tech bellwether Dell turned in a better-than expected first quarter result and the price of oil dropped below $126.
As of 6:20 am ET, the S&P Futures were up 2 points, the Nasdaq Futures were up 8 points, and the Dow Futures were up 25 points. Stocks rose on Thursday, bolstered by a more than $4 drop in crude prices.
On the economic front, investors will look to the Commerce Department`s report on personal income and spending for the latest on the mindset of the consumer. Other economic reports to consider include the Chicago PMI manufacturing survey and a revised reading on consumer sentiment from the University of Michigan.
Late Thursday, Wall Street Journal reported that talks between the Chief Executive Officer of United Airlines parent UAL Corp. (UAUA) Glenn Tilton and the US Airways Group Inc. (LCC) Chief Executive Douglas Parker have stalled for now. Both the chief executives were reportedly meeting on Thursday afternoon to discuss some of the issues holding up the merger deal and to share information on concerns raised by UAL directors at their last board meeting.
PC maker DELL: News, Chart, Quote Inc. (DELL) said Thursday after the markets closed that its first quarter earnings rose 4% from last year, helped by better than industry growth of commercial and consumer products and services as well as lower operating expense as a percentage of revenue and higher investment and other income. The company`s quarterly earnings per share also came in above analysts` expectations as did its quarterly revenue.
The company reported net income for the first quarter of $784 million or $0.38 per share, compared to $756 million or $0.34 per share for the year-ago quarter. Analysts expected the company to earn $0.34 per share for the first quarter.
Global stocks were mostly positive Friday. The FTSE of the UK was up 18 points, the DAX of Germany was up 42 points, and the CAC of France was up 31 points.
In Asia, the Hang Seng of Hong Kong rose 149 points and Tokyo`s Nikkei added 214 points.
