Skip to Content
Investing Specialists

Not Much Chance for 'QE3'

It is a relief that more Fed intervention is not forthcoming.

Mentioned: , ,

News this week was sparse, and the market didn't react well to the lack of data. Weaker economic import/export statistics out of China and continuing arguments over the Greek debt situation certainly didn't help markets, either.

On the bright side, the U.S. trade deficit improved dramatically, but almost all of that was due to the effects of the Japanese disaster reducing Japanese imports. If sustained, the shrinkage of the trade deficit could help offset at least a part of the negative effects of poor U.S. auto production when calculating second-quarter GDP.

Initial unemployment claims remained elevated at 427,000 but were virtually unchanged from the prior week. Given the Memorial Day holiday, I would have expected a little more improvement (fewer days to process claims and firms tend to make adjustments prior to holidays to avoid having to pay workers for the days off). Consumer credit managed another month of expansion, indicating a greater willingness for consumers to buy and borrow. However, total consumer debt including mortgages, credit cards, and bank loans decreased about 2% in the first quarter, representing its seventh quarter of decline according to the Fed's Z1 report. Meanwhile consumer net worth (all assets minus debts) managed a 4% (annualized rate) improvement during the quarter, no doubt the source of some of the upward movement in consumer spending.

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