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Fed says economic recovery likely to be more modest in near-term

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Fed says economic recovery likely to be more modest in near-term

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10Aug

Fed rate announcement at 2:15pm ET on Tuesday 081010

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There is a Fed rate announcement at 2:15pm ET on Tuesday
10 August 2010. On the previous Fed Day the FOMC
kept the rates in the 0% to 0.25% range.

Fed expected to downgrade US growth outlook

The Federal Reserve’s interest rate-setting panel will meet Tuesday, under pressure to bolster a weak economic recovery that many fear is grinding to a halt.

The 10-member body is expected to downgrade its assessment of the health of the world’s largest economy, as it keeps interest rates at historic lows.

The Fed’s policies have come under the microscope in recent months, as investors asked whether the central bank was overly rosy in its previous assessments, calling its credibility into question.

In June, the Fed said the economic recovery was “proceeding” despite headwinds and would remain “moderate for a time.”

That language — which is eagerly watched by investors — may now be revised to reflect a dramatic slowdown in the pace of the recovery.

“It will be hard to take the Fed seriously if a more forthright acceptance of the array of softer data is not forthcoming,” said Ian Shepherdson of High Frequency Economics.

The scale of the slowdown was laid bare last week, when the Labor Department reported 131,000 jobs were lost in July, far more than expected.

On Monday, researchers at the San Francisco regional Fed ditched the ordinarily couched language of central bankers to warn a double dip recession was possible.

“A recessionary relapse is a significant possibility sometime in the next two years,” researchers Travis Berge and Oscar Jorda wrote, adding that “the policies that are adopted today could play a decisive role in shaping the pace of growth.”

Fed watchers will be looking for any hint of a change in those polices Tuesday, specifically a return to stimulus spending that marked the depths of the recession.

The bank battled the financial crisis by spending more than one trillion dollars, buying up Treasury bonds, mortgage-backed securities and other financial instruments to lubricate markets.

The Federal Reserve may take a tiny step in that direction by reinvesting cash from maturing bonds rather than shrinking its portfolio.

Analysts say that could mean spending anywhere between 100-300 billion dollars over the next year.

“The FOMC faces a tough meeting tomorrow with the market pricing in either a significant change to the statement or, indeed, renewed moves to stimulate the economy, such as re-investing maturing coupons on bond holdings,” said UBS analysts in a note to clients.

But some market-watchers doubt the Fed will take such drastic action without a more explicit threat to the recovery.

“Other than implicitly marking down its near term growth outlook, we expect the tone of the FOMC to not be substantially different than June,” said Joseph LaVorgna, chief US economist at Deutsche Bank.

“We do not expect the Fed to symbolically announce that it plans to reinvest maturing mortgage backed securities back into the market.

LaVorgna indicated even a modest shift in policy such as altering the interest paid on banks’ excess reserves held at the Fed could upset fragile markets.

“We do not expect the Fed to cut the interest on reserves either, as that would wreak havoc.”

Most analysts expect the Fed to ply a middle course, setting out what it will do if things get worse.

“The committee is likely to define what can be done in terms of monetary policy, if the macroeconomic situation were to worsen in the near future,” said Thomas Julien of Natixis.

Tags: Fed expected to downgrade US growth outlook, Fed rate announcement at 2:15pm ET on Tuesday 081010

08Aug

The IBD 100 Top Ten for the week of August 9

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NFLX, BIDU, MELI, PCLN, IDSA, PPO, FFIV, VMW, DECK, HMIN, LULU, VIT — The IBD 100 Top Ten for the week of August 9

Tags: bidu, DECK, FFIV, HMIN, IDSA, LULU, MELI, NFLX, PCLN, PPO, The IBD 100 Top Ten for the week of August 9, VIT, VMW

06Aug

Stockshakers Market outlook 080610

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The market is waiting for an event, what event it is waiting for is a guess at best. Most of the indexes are sitting here very boring and waiting for the employment numbers. Gold may take off if they are bad. Oil is taking a breather but still in an uptrend moboing up to 84.

US Dollar lower lows. When the dollar creates the chart pattern it is setting up for here it typically bounces, Which also general signals market selling.

The Euro may rally at that point as well.

Chemicals are doing well right now DD is in a mobo pattern up.

KWR,WHX, MVO, MU, RIMM, AIG, KFT, CROX, & CB look interesting here

OIL $84.00+ is the next upside target. Support is $79.20. Crude Oil 82.28 +0.08 +0.10%

LVS & WYNN & ISLE for a 10% Move if it can breakout here based on the gambling in Macau http://online.wsj.com/article/SB10001424052748703545604575406520634752494.html?mod=googlenews_wsj

These guys may sell off for a moment but watch for them to reverse back to the upside.

Top Industries

Industry Rank as per Zacks

Rank Industry

1 AUTO -DOMESTIC (2) F & PCAR

1 ELECT CONSTUCTION (1) HUB.B

3 OIL-US RYLTY TR (2) WHX & MVO

3 SEMI-PRO LOGIC DEV(2) XLNX & ALTR

5 SEMI-MEMORY (3) SNDK & MU & STEC

Gapping up right now AGO,CROX,HANS,PKI,RMBS (Rumors of a potential takeover brewing)

buying CSCO below $25 — The game changer in the i-Pad space may be The Cisco Cius

Tags: Stockshakers Market outlook 080610

01Aug

The IBD 100 Top Ten for the week of August 2, 2010

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The IBD 100 Top Ten for the week of August 2, 2010: BIDU, HMIN, DECK, LULU, NFLX, IDSA, FFIV, MELI, VIT, CXO, SWKS, WPZ, MED

Tags: 2010, bidu, CXO, DECK, FFIV, HMIN, IDSA, LULU, MED, MELI, NFLX, SWKS, The IBD 100 Top Ten for the week of August 2, VIT, WPZ

29Jul

Economists see tepid recovery deep into 2011

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Economists see tepid recovery deep into 2011
The U.S. economic recovery will remain slow deep into next year, held back by shoppers reluctant to spend and employers hesitant to hire, according to an Associated Press survey of leading economists.

The latest quarterly AP Economy Survey shows economists have turned gloomier in the past three months. They foresee weaker growth and higher unemployment than they did before. As a result, the economists think the Federal Reserve will keep interest rates near zero until at least next spring.

Yet despite their expectation of slower growth, a majority of the 42 economists surveyed believe the recovery remains on track, raising hopes that the economy can avoid falling back into a “double-dip” recession.

The AP survey compiles forecasts of leading private, corporate and academic economists on a range of indicators, including employment, consumer spending and inflation. Among their forecasts:

•Economic growth the rest of this year and early next year will weaken, to less than 3 percent. From January through May, the economy grew at roughly a 3.5 percent pace.
•The unemployment rate will be no lower at the end of the year than it is now — 9.5 percent. A majority think it will be 2015 or later before the rate falls to a historically normal 5 percent.
•State budget shortfalls pose a “significant” or “severe” risk to the national economy. The loss of tax revenue has forced state and local governments to cut services and lay off workers.
The weak economy leaves Democrats and Republicans on Capitol Hill vulnerable as they head into the November midterm elections. Democrats, who now control both chambers, have the most to lose. The gloomier outlook is also a liability for President Barack Obama.

The economists have turned more pessimistic since the recovery hit turbulence in May. Europe’s debt crisis sent tremors through Wall Street, causing stocks to tumble and raising doubts about the durability of the rebound.
Since then, businesses have been slow to step up hiring. Americans’ confidence in the economy has declined, leading shoppers to reduce spending. And the housing market has weakened further with the end of a homebuyer tax credit that had buoyed sales earlier this year.

Consumers aren’t leading this rebound, as they usually do, despite ultra-low borrowing costs. Their spending growth will weaken in the second half of this year and strengthen only slightly next year, a majority of economists said. They think shoppers’ reluctance to spend more money poses a “significant” or “severe” risk to the recovery.

“It seems like we hit an air pocket in consumer spending,” said survey participant Richard DeKaser, president of Woodley Park Research.

Kasey Doshier, a graphic designer in Chicago, said the recession taught her to rein in her spending. The key moment came early last year, when her employer cut her pay 15 percent to avoid layoffs.

“I just lived paycheck to paycheck and had a good time,” said Doshier, 32. “It’s kind of scary to think that I am a paycheck away from being homeless.”

Doshier’s pay has been reinstated, but she’s still watching her money. Dinner and drinks with friends are gone. Now she goes to free street festivals and the city pool. She explores Chicago neighborhoods by taking her dog on long “adventure walks.”

The tight job market, scant pay raises and drooping home values are forcing others, too, to spend less and save more. Americans saved 4.2 percent of their disposable income last year. That was the highest level since 1998. Economists expect roughly the same level of saving this year and next.

That’s why growth of less than 3 percent is forecast into 2011. And weak growth helps explain why unemployment is likely to stay high. It takes about 3 percent growth just to create enough jobs to keep pace with the population increase.

Growth would have to equal 5 percent for a full year to drive the unemployment rate down by 1 percentage point. Neither the economists in the AP survey nor the Obama administration expects that to happen.

The Fed’s outlook has turned bleaker, too. It’s why Chairman Ben Bernanke and his colleagues are weighing new steps to invigorate the economy if the recovery shows signs of backsliding. They are also expected to hold interest rates at record lows longer than economists thought three months ago.

A survey the Fed released Wednesday showed the economy facing a bumpy path back to health. The pace of economic activity remained modest in most of the country.

Most economists surveyed said the Fed would being raising short-term rates no sooner than next spring. In the last survey, most had thought it could happen as soon as late this year.
At the same time, state budget shortfalls have emerged as a major threat in the economists’ view. State and local governments cut their spending in the first three months of this year at a 3.8 percent pace. That was the biggest cutback since the second quarter of 1981, just before the economy entered a severe recession.

When states and localities tighten spending by trimming services and jobs, the cutbacks ripple through the broader economy, causing individuals to spend less, too. The drop in state and local government spending shaved about half a percentage point off the U.S. gross domestic product in the first three months of this year.

Nearly two-thirds of the economists view the states’ budget crises as a significant or severe threat to the rebound.

Despite such risks, 55 percent of the economists described the recovery as “on track” as of the middle of the year. The rest said it was “faltering.”

“There’s a risk that the loss of momentum will snowball and feed on itself, but I think in the end the recovery will stay on track,” predicted another survey participant, James O’Sullivan, global chief economist at MF Global.

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Fed says economic recovery likely to be more modest in near-term

Fed rate announcement at 2:15pm ET on Tuesday 081010

The IBD 100 Top Ten for the week of August 9

Stockshakers Market outlook 080610

The IBD 100 Top Ten for the week of August 2, 2010

Economists see tepid recovery deep into 2011

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