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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: HairBall who wrote (24039)	8/28/1999 12:24:00 AM
From: John Madarasz	Respond to of 99985

Economic Week in Review: August 23-27, 1999 As widely expected, the Federal Reserve Board's Open Market Committee raised short-term interest rates for the second time in three months on Tuesday. Financial markets seesawed thereafter. For the week, the yield of the 30-year U.S. Treasury bond dropped 2 basis points to 5.97% (as of 4:30 p.m. Friday). The S&P 500 Index rose 0.9%. In an effort to cool the economy and stave off inflation, the Fed raised its target for the federal funds rate--the rate that banks charge each other for short-term loans--by 0.25 percentage point (25 basis points) to 5.25%. The Board of Governors also raised by a quarter point the discount rate--which is what the Fed itself charges banks for loans--to 4.75%. These steps, combined with a hike of 25 basis points in the federal funds rate on June 30, "should markedly diminish the risk of rising inflation going forward," the Fed said in a statement. The Fed also adopted a neutral stance toward future rates. Last autumn, in the wake of global currency crises, the Fed trimmed the federal funds rate by 0.25 percentage point on three occasions. On Thursday, the Commerce Department reported a moderation in economic growth: Gross domestic product (GDP), a measure of total output by the U.S. economy, expanded at an inflation-adjusted annual rate of 1.8% during the second quarter. The department had earlier estimated growth for the April-June quarter at 2.3%. The new report suggests that the economy's expansion has slowed markedly from annual rates of 4.3% in the first quarter of this year and 6.0% in the fourth quarter of 1998. Consumer spending, which represents about two-thirds of all economic activity, continued to set the pace during the second quarter. The GDP price deflator--the broadest measure of inflation--showed prices rising at a modest annual clip of 1.5%, a bit lower than previously estimated. Several reports on economic activity in July pointed to continuing expansion. The Census Bureau said that orders for durable goods--items expected to last three years or more--jumped 3.3% for the month, a sign of strength in manufacturing. The market for existing single-family homes remained vibrant too. July's annualized sales rate of 5.41 million homes was a good showing, although it was down 3.9% from June's pace, according to the National Association of Realtors. Meanwhile, personal spending rose 0.4% while personal income grew 0.2%, the Commerce Department reported. The national savings rate weighed in at - 1.4%, meaning that households spent all of their after-tax income and tapped into savings or borrowed to spend a little more. Households have now been in deficit mode for eight consecutive months. Economic reports scheduled for release the week of August 30-September 3 include new-home sales (due Monday), consumer confidence (Tuesday), manufacturing activity (Wednesday), and productivity and manufacturing costs (Thursday). vanguard.com