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Economic woes continue to haunt the stock market with the outlook worsening. There were several reports released Wednesday, though the focus remained on Capitol Hill where discussions continued about TARP and an auto industry bailout. Data was released about housing starts, consumer prices and the last FOMC meeting, which didn’t provide the positive news the bulls were hoping for.

Mortgage applications for the week ending Nov. 14 fell by 12 percent to a level of 248.5. This news followed up a sharp decline in the housing market index on Tuesday. Housing starts fell 4.5 percent in October to a level of 0.791 million units. This was slightly better than estimates, but with building permits falling 12 percent, the outlook remains bleak for the sector. The yearly drop in building starts sits at 38.0 percent with permits down 40.1 percent year on year. This week’s news about housing points to problems continuing well into 2009.

On Tuesday, producer prices fell more than expected overall, but were higher at the core. Today, consumer prices showed a 1.0 percent decline in October with the core off 0.1 percent. Both figures were below estimates for readings of a decline of 0.7 percent and a gain of 0.1 percent for the headline and core. Year on year, the headline CPI fell to growth of 3.7 percent in October, down from 4.9 percent in September. Of course, energy prices were the main reason for the decline in the CPI, but weak import prices and declining consumer demand are also part of the equation.

With the global economy slowing, energy prices have fallen sharply. In July, crude prices topped above $147 a barrel with the commodity closing Thursday’s session at $53.62, a decline of 77-cents. Crude oil reserves for the week ending Nov. 14 rose by 1.6 million barrels with gasoline stocks up 0.5 million barrels. The drop in retail gasoline prices has provided some extra cash for consumers, but the large loss of jobs and other economic issues have more than offset the positives from lower gasoline prices.

On Oct. 28-29, the FOMC held its scheduled meeting, which resulted in the Fed funds rate being cut by 50-basis points to 1.0 percent. Today, the minutes from this meeting were released, which showed how concerned Fed leaders are about the state of the economy. The committee lowered its GDP forecast for the fourth quarter and for 2009. For the full year 2008, the FOMC sees real GDP in a range from 0.0 to 0.3 percent. For 2009, they see real GDP growth from -0.2 to 1.1 percent.

Thursday’s economic calendar will include data on weekly jobless claims and the Philly Fed Survey, as well as the Leading Indicators report. With jobs market virtually falling off a cliff of late, there will be a lot of attention on jobless claims. For the week ending Nov. 8, jobless claims rose by 32,000 to a level of 516,000. Expectations are for the number of claims to fall slightly this past week to a level of 505,000.

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

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