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Investing Specialists

We Still See Green Shoots

This week's economic reports show the re-emergence of green shoots after last week's disappointing numbers.

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This week provided some welcome relief from last week's pretty disappointing set of economic reports. Overall, indicators for the week were positive, but there were no radical changes in either direction despite a few upside surprises. Initial unemployment claims resumed their glacial improvement, while new home sales and median home prices showed improvements. Several measures of consumer confidence that were released this week were very positive.

On the business side of the equation, more regional Fed data was released that supported the thesis of a better manufacturing climate. This bodes well for the more closely watched ISM (purchasing managers') Survey due next week. Durable goods orders looked fine but were positively influenced by strong defense orders.

One negative note for the week was that the 10-year Treasury bond jumped to a 3.7% rate before backing off a bit at the end of the week. This compares with a recession low of around 2%. There is some fear that such a jump would trigger higher mortgage rates, shutting down some of the nascent improvement in the housing industry. Our take is that even with higher rates, housing still remains more affordable than it has been in a couple of decades.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.