Economic Week in Review: March 19-23, 2001
As expected, the Federal Reserve Board cut its target for short-term
interest rates on Tuesday, reducing the federal funds rate--the rate
for overnight loans between banks--by half a percentage point for the
third time this year. But the Fed's announcement was followed by an
immediate sharp drop in stock prices as investors apparently expected a
bigger cut. During the week, the technology-dominated Nasdaq Composite
Index hit a new 28-month low before recovering somewhat, while the blue
chip Dow Jones Industrial Average fell to a two-year low, even dipping
into bear market territory--a 20% decline from its peak in January
2000--on Thursday. The S&P 500 Index remained mired in bear territory
and fell 0.9% for the week, to 1,140. The 10-year U.S. Treasury note's
yield, which moves in the opposite direction from its price, rose 3
basis points to 4.79% (as of 4:30 p.m. Friday).
The Consumer Price Index, a key gauge of inflation, rose a higher-than-
expected 0.3% in February. Prices of food, clothing, and medical care
saw the biggest increases. Energy prices--which accounted for more than
half of the 0.6% rise in January's CPI--decreased in February but were
still 13.1% higher than in the same period a year earlier. The "core"
CPI, which excludes food and energy prices, also rose 0.3% last month.
Since February 2000, the core inflation rate is up 2.7%, while the
overall rate has increased 3.5%.
As reported by the Conference Board on Thursday, the index of leading
economic indicators fell in February, its fourth decline in five
months. However, the board said the 0.3% dip--with five of the index's
ten indicators declining--was not enough to signal a recession.
According to the board, the index indicates the U.S. economy is still
growing, though at a slower pace.
With imports rising faster than exports, the U.S. trade deficit widened
to $33.3 billion in January--the biggest gap since September's record
$33.5 billion deficit.
Due in the week ahead is the latest estimate of fourth-quarter gross
domestic product, the broadest gauge of U.S. economic activity, which
is scheduled for release on Thursday. Also due are reports on existing-
and new-home sales (both on Monday), consumer confidence and durable-
goods orders (both on Tuesday), and personal income and spending
(Friday).
Summary of Major Economic Reports: March 19-23, 2001
-----------------------------------------------------------------------
|Date Report Actual Expected 10-Year S&P 500|
| Value Value Note Yield Index |
|---------------------------------------------------------------------|
|March 19 +5 bp +1.8% |
|---------------------------------------------------------------------|
|March 20 Federal Open |
| Market Committee |
| lowers short-term |
| interest rates by |
| 0.50 percentage |
| point |
|---------------------------------------------------------------------|
| U.S. Trade -$33.3 -$33.7 -6 bp -2.4% |
| Balance (January) billion billion |
|---------------------------------------------------------------------|
|March 21 Consumer +0.3% +0.2% |
| Price Index |
| (February) |
|---------------------------------------------------------------------|
| CPI, except +0.3% +0.2% No change -1.8% |
| food and |
| energy (February) |
|---------------------------------------------------------------------|
|March 22 Leading -0.3% -0.2% |
| Economic |
| Indicators |
| (February) |
|---------------------------------------------------------------------|
| Initial Jobless 379,000 373,000 -2 bp -0.4% |
| Claims (3/17) |
|---------------------------------------------------------------------|
|March 23 +6 bp +2.0% |
|---------------------------------------------------------------------|
| Weekly +3 bp -0.9% |
| Change |
-----------------------------------------------------------------------
bp = basis points.
Note: The economic statistics presented in this report are subject to
revision by the agencies that issue them.
"Standard & Poor's(r)," "S&P(r)," "S&P 500(r)," "Standard & Poor's
500," and "500" are trademarks of The McGraw-Hill Companies, Inc. |
