An interesting week financially and economically; markets tumbled and experienced increases in volatility, economic worries fueled by European solvency and U.S. growth prospects also hazed outlooks. Few economic indicators countered worries, but unemployment dropped even though employment also dropped by 38,000 people per the Bureau of Labor Statistics.
• ISM manufacturing and service sector indicators decline
• Recession fears enter financial dialogue
• Major stock indexes break downside 200 day moving average
• Spanish, Italian and Portuguese bond yields raise repayment doubts
• Sweet Crude Oil price drops below $90 per barrel
• Japanese government sells $8.8 billion worth of Yen
• BLS reports .1 percent drop in unemployment
The European Central Bank stemmed concerns on Friday when it requested Italy work toward putting its fiscal house in order in exchange for bond purchases per the Wall Street Journal. This puts increasing pressure on performing Eurozone nations to foot the bill, but if Italy follows through it could be a positive development. However, some U.S economic indicators seem questionable, one of which is the trade balance which indicates increased imports over exports meaning more capital is flowing out of the country than in.
U.S. Trade Deficit, 2001-2011
Source: Bureau of Economic Analysis
After all corporate profits have been strong, but are also declining according to The Fiscal Times reporting on Bureau of Economic Analysis data. That may change in the second half of 2011, but it also may not. Economic expansion is still occurring albeit at a snails pace, just .805 percent annualized based on Q1-Q2 2011 government estimates. It looks as though GDP is under pressure to perform.
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