With the disconnect between logic and market activity being well established at this point, this headline may be redundant but several items need to be reported at least for posterity sake.
Today the Dow Jones Industrial Average rallied more than 250 points after continued signs of inflation and housing troubles. Yesterday the Producer Price Index for March was released, showing an increase of 1.1%. Of course the PPI minus food and energy was up only 0.2% for those of us who do not eat or use energy. The expectations for the overall number was 0.4%, which makes you wonder what planet the various economists who make up those expectations live on. Year over year the PPI is up 6.9%. Food and energy are excluded, we are told, because of their volatility but there is really no justification for excluding them from yearly figures. Crude oil, by the way, hit $115 today.
Today’s Consumer Price Index (CPI) rose 0.9% without seasonal adjustments, 0.3% including seasonal adjustments and 0.2% minus food and energy. I guess the people who compile these numbers figure that Americans won’t think prices are going higher if they tell them different.
The census Bureau reported that Housing Starts in March dropped 11.9% and 36.5% below March ’07 figures.
What was the positive news? Intel, a company with as expected first quarter earnings, issued a stronger than expected forecast for the remainder of 2008. Check out the Forbes story. Not real numbers but expectations. I guess real numbers, housing starts down 11.9%, PPI up 1.1%, CPI at 0.9% (unadjusted) , JP Morgan quarterly profits halved, are all lagging indicators but equity forecasts are another story altogether.
But what about the Fed? The market rally saved them from having to take additional action to support it through rate cuts and term auctions. The Fed released its Beige book today. It stated, “Reports from the twelve Federal Reserve Districts indicate that economic conditions have weakened since the last report (March 5)”
The Dow was 350 points lower on March 5 than it was at today’s close, but who cares what the Fed says as long as they keep the money flowing.
