05/11/01     05/04/01     %Change

S&P 500                 1,245.67     1,266.61      -1.65%
Dow Jones              10,821.31    10,951.24      -1.19%
NASD Comp               2,107.43     2,191.67      -3.84%
Russell 2000              487.36       492.89      -1.12%
SOX Index                 616.78       638.95      -3.47%
Value Line                396.97       401.01      -1.01%
MS Growth                 557.11       554.61       +.45%
MS Cyclical               546.20       548.42       -.41%
T - Bill                    3.68%        3.64%      +4 BP
Long Bond                   5.88%        5.65%     +23 BP
Gold - Oz-Near Month     $269.50      $266.40      +$3.10
Silver - Oz-Near Month     $4.35        $4.36       -$.01

Economic News:
==============

Last Week's Data Mixed But Skew Is Positive
 FOMC Likely To Lower Rates But Probably Will Remove Bias
 Second Half Recovery Prospects Continue To Improve

*March Consumer Credit rose at +4.7% annualized rate

*Wholesales Inventories up +.1% in March - Sales fell -1.3%
  Inventory/Sales Ratio rose to 1.32 months

*1 st Qtr Productivity fell -.1% - Unit Labor Costs rose +5.2%
  Way above expectations - See Below

*Jobless Claims fell -41,000 to 384,000 - Four Week
  Moving Average drops -3,000 to 402,500

*European Central Bank and Bank of England lower rates

*April Producer Price Index rose +.3% - Core Rate -
  Without Food & Energy rose +.2% - Better Than Expected

*April Retail Sales up +.8% - Ex Autos up +.7% - Big Gain

*Univ. of Michigan Mid-May Sentiment rose to 92.6 from
  April Month End level of 88.4

When the Federal Open Market Committee (FOMC) meets on
Tuesday they are likely to lower short term rates for the
fifth time this year.  The best bet, in our opinion, is
another half point, as an insurance policy.  In addition,
we think it more likely than not that they will remove
their bias toward lowering rates further near term, opting
instead to back off and await the final fiscal stimulus
package and to give their prior rate cuts time to impact the
economy in a more meaningful manner.  In our view, the risk
is now shifting from a serious recession (we never did believe
one would occur) to the possibility of providing too much
stimulus when the economic growth rate is reaccelerating.

The good news last week related to the consumer, and less so
to the labor markets.  Most significantly, retail sales in
April rose +.8%, a very large gain, even given that there
was very likely some shifting of sales from March to April.
As the consumer accounts for two thirds of United States
economic activity, the second quarter began with reasonable
momentum in an obviously important sector.

Additionally, the March credit data was soft, but this is
a) old news, as in last quarter, and b) a modest "balance
sheet" rebuilding plus for consumers.  Simply put, any
improvement in consumers' financial condition helps support
future spending, given reasonable levels of confidence.

And, it appears that consumer confidence is at least stabilizing
if not improving a bit.  The Michigan Survey will need to be
confirmed by other reports, but at least "bouncing along the
bottom" now appears to be the worst case.  And, if the job market
continues to improve a bit, confidence should improve more.
The point is not the slope of the recovery, but that there is
in fact a recovery to support consumer spending.

The bad news in last week's data was the lousy, no other way
to put it, productivity number, and the resulting large increase
in unit labor costs.  Our view is that the FOMC will ignore
the number as it appears that they believe productivity
improvements are fairly permanent, and that what is needed is
a higher economic growth rate combined with the lagged impact
of "force reductions" - layoffs.

The Producer Price Index does buy the FOMC a little leeway as
it was modestly better than expected, and certainly no
acceleration from recent reports.  So, should the FOMC choose to,
the increase in inflationary pressures from higher unit labor
costs can safely be ignored short term.  But, our view is that
the risks have increased somewhat so that inflationary pressures
could become more of a concern than consensus expectations.

Near term, though, the focus will remain on the reacceleration
of economic growth, hopefully to at least a three percent rate
during the second half, but not much higher - from our viewpoint.
If that scenario plays out, the "soft landing" will have been
achieved, and the buildup of inflationary pressures likely
contained.  Clearly such an outcome is the most desirable.

Slower growth in the second half would cause analysts to revise
2002 earnings projections downward, and much faster growth,
unless productivity really improves, would increase inflationary
pressures.  Nirvana in the form of a "soft landing" has not yet
arrived, but the odds seem to be improving.  Stay tuned !

Current Weekly Calendar of Economic Data:
=========================================

Monday: Business Inventories, Industrial Production, Capacity Utilization

Tuesday: FOMC Meeting

Wednesday: Housing Starts/Permits, Consumer Price Index

Thursday: Jobless Claims, Leading Indicators Index, FOMC Minutes, Philadelphia FRB Index

Friday: International Trade Deficit