What is the costliest fruit?
How about an apple, as in Apple, Inc.? With more than $500
billion in market capitalization, Apple is the world’s most valuable company,
according to Reuters. Last week, the company reported quarterly earnings that
easily trumped analyst forecasts and this helped propel the S&P 500 to a 1.8
percent weekly gain. But it’s not just Apple that’s doing well. According to
FactSet, a robust 78 percent of the S&P 500 companies that have reported
earnings so far this quarter have beaten analysts’ forecasts.
Last week’s gains came despite some disappointing economic
news which included the following:
·
A weaker than expected reading on U.S.
gross domestic product (GDP), the broadest measure of all goods and services
produced in our country.
·
A downgrade of Spain’s government
debt—perhaps not surprising since the country now has a debilitating unemployment
rate of 24.4 percent.
·
A second consecutive quarter of
negative economic growth in the U.K., indicating they have slid back into
recession.
Sources:
The Wall Street Journal, Yahoo!
Finance, Bloomberg
Overall, the economy continues to chug along at a modest
pace. Not quite fast enough to signal “all clear” and not quite slow enough to
signal “recession ahead.”
THE HOUSING MARKET STILL
HAS THE BLUES, according to a widely followed
barometer of home prices in the U.S. The S&P/Case-Shiller Index is designed
to show how home prices are performing in the twenty largest cities and last
week’s report showed the index is at its lowest point since October 2002.
Since the peak of the index in 2007 through February of this
year, home prices have lost one-third of their value—and that’s even with
record low interest rates on mortgages. Unfortunately, tough employment
conditions have kept many potential homeowners on the sidelines. Adding to
that, obtaining a loan from a bank remains difficult without very good credit.
Even though home prices continue to decline, a silver lining
might be emerging. According to the National Association of Realtors, an index
that measures the number of agreements signed to buy previously owned homes
rose in March to its highest level in two years.
The increase in interested home buyers is coming at a time
when supply is declining. Inventory levels in many markets are at their lowest
level in years. For example, according to The
Wall Street Journal, at the current pace of sales, it would take only 1.5
months to sell all the homes in Sacramento, CA. Considering pickings are pretty
slim, home builders have also benefitted. New home sales in the U.S. are up 16
percent so far this year.
Unfortunately, this recent decline in available homes for
sale may prove to be temporary because Fannie Mae, Freddie Mac and other banks
have been slow to list for sale hundreds of thousands of foreclosed homes. In
fact, banks and other investors are believed to hold 450,000 foreclosed homes
while an additional 2 million are currently in the process of being foreclosed.
Ultimately, the solution to the housing blues may be strong
economic growth. And as last week’s GDP numbers show, that strong growth hasn’t
started yet.
Weekly Focus – Think About It
“In order to get a loan you must first prove you don't need
it.”
--Murphy's Law
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