Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: zello who wrote (60335)	1/6/2000 8:22:00 PM
From: T L Comiskey	Read Replies (1) \| Respond to of 152472

zello........ Thursday - 19:56 01/06/2000, EST Economy Shows Signs of Slowing WASHINGTON (Reuters) - U.S. consumers bought new homes in November at a slower-than-expected pace and the number of Americans filing jobless claims rose, the government said on Thursday, offering signs the economy may have begun to slow. The housing data reinforced the notion that after a record, boom year for real estate in 1999, the sector may be a drag on the economy this year. But rising home prices raised concerns of potential inflation in the world's richest economy. The Commerce Department said the number of new single-family homes sold in November fell by 7.1 percent to a seasonally-adjusted annual pace of 865,000 units compared with a 931,000 unit pace in October. The October rate was revised down sharply from a previously reported pace of 986,000 units. The 7.1 percent decline was the largest since an 8 percent fall in December of 1997. Economists polled by Reuters had expected a stronger sales pace in November of 926,000 units. ``While a home sales rate of 865,000 is still very strong on a historical basis, it is off over 12 percent from November 1998,' said economic consultant Joel Naroff of Philadelphia. 'That tells us that residential investment should be a drag on the economy during this year. The data helped soothe financial markets with the benchmark 30-year U.S. Treasury bond gaining ground and the Dow Jones industrial average rising 130.61 points to close 1.17 percent higher at 11,253.26. But the technology-laden Nasdaq index closed 3.88 percent lower as investors continued to take profits after last year's steep rise in Internet stocks. In mid-November the Federal Reserve increased interest rates for the third time last year, to try and cool the robust U.S. economy and head off potential inflationary pressures. ``The more modest pace of new home sales takes some of the fear out of financial markets that the economy was not responding to the Fed's previous interest rate hikes,' said Mark Vitner, an economist at First Union. The Fed's rate increases helped push the interest rate on the average 30-year mortgage close to 8 percent, a full percentage point above year-earlier levels. And with housing now apparently slowing, economists said other areas of the economy would also benefit. ``If home sales overall slow down ... then you will see a slowing of consumption spending from its hyper pace and we'll see the savings rate start to inch up again, and the Fed will see that as a happy occurrence in this economy,' said James Annable, chief economist at WingSpanBank.com. ``These home sales numbers are an important part in the puzzle which is how do we get this economy to slow a bit and therefore take some of the pressure off the Fed' to hike rates more aggressively, he added. The hot housing market has been a major factor behind sky-high levels of consumer spending which have driven the economy at red-hot rates of growth pushing the nation toward its longest ever economic expansion. The expansion is set to reach 107 months in February, beating the 106-month record set in the 1960s. Home buyers typically spend lavishly on appliances and furnishing. That spending, combined with renovations of newly bought older homes, contributes more to economic growth than the cost of building new houses, so a slowing housing market helps slow the overall economy. But despite the slackening home sales pace, there was one worrisome aspect to the report: rising house prices. The median home price rose to a record $167,400 in November from $159,000 in October while the mean home price rose to a record $209,700 from $201,300 in October, an indication that Americans were still buying luxury homes. Naroff said those higher prices were a ``clear warning that inflationary pressures are building in the economy' and were a potential worry for the Fed. Housing prices, considered a capital purchase, are not directly included in inflation data but can still have a major effect on inflation since higher house prices push rents up. Separately, the Labor Department reported the number of newly unemployed Americans filing for state benefits jumped by 33,000 last week, the largest one-week rise in a year. Initial jobless claims, which gives an early reading on the strength of the labor market, rose to 309,000 in the holiday-shortened week ended Jan. 1. That was much steeper than the 280,000 expected by Wall Street analysts. But while the data seemed to indicate some easing of labor market pressures, Annable suggested it should be ``taken with a grain of salt' due to seasonal fluctuations in employment around the Christmas retailing season.