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Michele Zelvis

The Economy VS. Rates

Wednesday, February 9, 2011 - Article by: Michele Zelvis - First Priority Financial - Message

This week in the economy:

The past week has seen some of the most impressive economic news in years. Although this is great news for our economy it has wreaked havoc on interest rates.

With the Dow up over 12,000 and the S&P 500 having its best January since 1997, it appears that investors aren't letting the Egyptian protests discourage their investing. Corporate earnings are far better than expectations and, better than that, future earning estimates are up.

Most economic data has been good; Q4 productivity up by 2.6% which indicates people are working harder and because of that personal income was up in December. With all of the good economic news out a lot of folks are worried about inflation but things aren't too bad just yet since Core PCE Prices (the inflation number the Fed watches) was up just 0.7% in the past year.

Manufacturing and Services indexes showed good economic growth. Even though January Employment only showed a gain of 36,000 jobs, this was blamed on the unusually bad weather keeping people from working, several hundred thousand more than usual. Private sector payrolls were up 50,000, their 11th monthly gain in a row, which helped drop the unemployment rate to 9.0%

So good news for stocks = bad news for bonds. Investors wanting to get on board with better stock prices took their money out of bonds.

Despite the great news in stocks, the improving economy and low inflation kept mortgage rates at historically low levers. Freddie Mac reported that the average fixed-rate mortgage rates are pretty much unchanged.

Hoping this helps,

Michele Zelvis

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