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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Sully- who wrote (49048)	3/27/2002 3:10:40 PM
From: Dealer	Respond to of 65232

Housing, Fed Reports Add to Optimism Wed Mar 27, 2:01 PM ET By Mark Felsenthal WASHINGTON (Reuters) - A strong housing report from the U.S. government and a gauge of broad activity issued by a regional Federal Reserve (news - web sites) bank on Wednesday bolstered expectations the U.S. economic recovery is gaining momentum. Economists said signs pointed to a gradually accelerating rebound that would let the inflation-wary Federal Reserve leave interest rates at current four-decade lows for the time being, a view supported by recent comments from Fed officials. "There's still not enough to suggest that the Fed is about to be raising rates," said Steve Ricchiutto of ABN Amro. Sales of new U.S. homes rose 5.3 percent in February, reversing a big drop the prior month, the Commerce Department (news - web sites) said in a report that showed the housing sector is thriving. New single-family homes were sold at a seasonally adjusted rate of 875,000 last month, slightly below expectations. The rise indicates the revised 15.8 percent decline in January -- to the slowest pace in a year-and-a-half -- was merely a lull in what has been a vigorous housing market despite troubles elsewhere in the U.S. economy. "Sure, new home sales didn't completely reverse the drop in January, but December's level was particularly high," said Ken Matheny, senior economist for Macroeconomic Advisers. The big drop in home sales in January -- which was out of sync with a big rise in existing home sales that month -- may also have reflected the end of sales incentives offered by some home builders, said National Association of Home Builders chief economist David Seiders. FIRST GAIN SINCE JUNE 2000 In another sign the economy has turned the corner, an index that tracks broad economic activity rose in February for the first time since June 2000, the Chicago Federal Reserve said. Optimism about the economic recovery helped boost blue-chip stocks on Wednesday with the Dow Jones industrial average rising more than 89 points, or 0.87 percent, to 10,443.38. U.S. Treasury bonds barely budged despite the data as traders weighed the positive numbers against hopes interest rises would not emerge as soon as debt investors had feared. In its report, Commerce said inventories of unsold homes rose to 313,000 in February, the highest since December 1996. But since buildings under construction are counted as unsold, that rise may reflect a recent pickup in the pace of housing starts, Seiders added. A spate of positive U.S. data has rolled out in the past few weeks, stimulating hopes for a sustained recovery in an economy that went into recession in March 2001, according to the National Bureau of Economic Research, the widely recognized arbiter of U.S. business cycles. The NBER said earlier this month that the decline in activity may be coming to an end. The Chicago Fed's national activity index, a weighted average of 85 indicators of national economic activity, rose to +0.04 from an upwardly revised reading of -0.33 in January, the third straight improvement in the index. The January reading was upwardly revised from -0.51. "With the monthly index at +0.04 and improving over the last three months, the economy is clearly moving toward recovery," the Chicago Fed said. However, the Chicago Fed index's three-month moving average -- which irons out month-to-month fluctuations -- logged a negative reading, which the bank said was evidence the national economy was still growing below trend last month. "Whether the U.S. economy was still in recession is unclear," said the Chicago Fed. In its last index release, the regional Fed bank said the economy still appeared to be in recession in January. On the plus side, a negative reading is a good sign for the inflation outlook in the year ahead, the Chicago Fed said. FED LANGUOROUS ON RATE HIKES Fed policymakers are seen raising interest rates at some point this year to keep price pressures tamped down as the economy recovers. But Dallas Fed President Robert McTeer said on Tuesday that inflation was tame and that he was "not in a hurry" to see rates rise. The central bank cut interest rates 11 times last year by a total of 4.75 percentage points. Now the U.S. economy is believed to be recovering from the recession, continued vitality in the housing market, which helped mitigate the downturn, is expected to contribute to the expansion. The buying of a new home is usually followed by purchases of other big-ticket items such as furniture, appliances, and home and garden supplies. Other recent housing reports have shown surprising stamina in the sector. February existing home sales fell from a record level but were still seen as strong, while housing starts jumped in the month to their fastest pace in three years.