U.S. Economy

We Want to Hear From You: How Do You Feel About the U.S. Housing Market?

Housing market reports released last week showed that prices and sales are up from a year ago. The Standard & Poor's Case-Shiller Home Price Index showed a 2.3% increase in prices for March on a year-over-year basis, and the National Association of Realtors said sales of previously owned homes rose 7.6% from March to April – a five-month high – and were up 22.8% from April 2009.

The median existing single-family home price was $173,400 in April, up 4.5% from a year ago.

Government-incentive programs offering tax credits to buyers have helped bolster the U.S. housing market in recent months. First time homebuyers were eligible for an $8,000 tax credit if they signed a contract by April 30.

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U.S. Treasury Bonds: The Not-So-Safe "Safe Haven"

In the last few weeks, international investors spooked by the budget crisis in Greece and the turmoil in southern Europe have been flocking into the U.S. Treasury bond market as a "safe haven."

The huge resulting funds flows have pushed the 10-year Treasury bond yield down to 3.16%, very little above its level during the crisis of October 2008. To a rational investor, this is extremely peculiar: After all, what on earth is safe about the "haven" of long-term U.S. Treasury bonds?

To learn about the potential investment dangers posed by U.S. government debt, please read on…

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Question of the Week: Readers Respond to Money Morning's U.S. Consumers Query

Recent reports show U.S. consumers are spending again; some are even ditching the whole discount mentality in favor of luxury brands and making long-delayed big-ticket purchases.

The shift from buying cheaper necessities to comfortably splurging is shown in strong quarterly numbers from Whole Foods Market, Inc. (Nasdaq: WFMI) and Saks Inc. (NYSE: SKS). Whole Foods' quarterly profits doubled from the same period a year ago, while Saks reported a profit of 12 cents per share – higher than the predicted 5 cents per share.

Whole Foods products offer consumers a break from pinching pennies while not viewed as an out-to-dinner splurge. Consumers are putting themselves out there a little more and feel more comfortable buying some higher-end foods – and now the company's stock has gone up 83% since May 2009.

Businesses such as jewelers and travel agents are benefiting from this growing willingness to spend.

But don't misunderstand: Although U.S. consumers are venturing back from their spending hiatuses, they remain cautious buyers.

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We Want to Hear From You: How Are You Responding to Market Volatility?

The Dow Jones Industrial Average dipped below 10,000 Tuesday for the first time since February as a month of market volatility and price declines continued.

The zooming rebound in U.S. stock prices from their March 9, 2009 bottom – the strongest rebound since the Great Depression – has been stymied by concerns over the Eurozone debt contagion, financial reform, the market flash crash and new political sparks in Korea. Data shows that the bulls are still hanging around – on the sidelines – but the bears have been calling the shots during a month that has seen stock prices fall more than 8%.

"I think it's a question of pick your poison," Dan Alpert, managing partner at Westwood Capital, told MarketWatch. "The market was poised for a very severe correction and whether it's southern Mediterranean countries or worries about German banks, you can pick your catalyst."

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Will Extreme Volatility Actually Stabilize the Markets?

Stocks tumbled across the board last week like a pair of dice rumbling around a craps table, rocked by extreme volatility.  Just when it looked like they were rolling up the unnerving loss of the critical 200-day average on Thursday, bulls' returned to the fray and pushed the major indexes just barely back into safe territory.

But is the market really safe? It's currently at the bottom of its multi-week range, so this is the time to get bullish again if you think the range will remain in force. The S&P 500 Index actually touched its February 2010 low on Friday before rebounding, which will give all the range-traders a green light.

Click Here to Find Out What Last Week's Extreme Volatility Means for the Markets...

Dodge a Possible Debt Debacle With These Two Stimulus-Plan Safety Plays

U.S. President Barack Obama's $862 billion stimulus plan, passed in great haste after his inauguration, has now revealed its true costs and benefits. It didn't revive the U.S. economy – that bottomed about May 2009, before a dollar of it had been spent. Further, combined with the mad wave of similar "stimulus" outlays across the planet, it has destabilized global bond markets – which may end up being very expensive indeed.

For details of the two stimulus-plan safety plays, read on…

For details of the two stimulus-plan safety plays, read on...

Occidental Petroleum Leads Onshore Oil Hunt as Offshore Drilling Faces Tighter Regulation

Occidental Petroleum Corp. (NYSE: OXY) announced yesterday (Wednesday) it was doubling the capacity estimate for a California oil field discovery as U.S. offshore drilling restrictions fuel onshore interest.

The Los Angeles-based oil explorer has focused on onshore oil production for years and estimates its current discovery near Bakersfield, California holds up to 500 million barrels of oil, valuing it at more than $34 billion at current prices.

"There is a lot of new interest in onshore-production potential in the U.S. and Occidental is at the forefront of that," Brian Youngberg, an analyst with Edward Jones & Co., told Bloomberg.

Occidental, the fourth largest U.S. oil and gas producer, made the announcement at a meeting with investors and analysts Wednesday in New York. Chief Executive Officer Ray R. Irani detailed the company's long-term strategy for profitability.

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What Really Caused the Stock Market 'Flash Crash'

Just when you thought it was safe to get back into U.S. stocks, you think you see a shark.

If you are searching – like the regulatory lifeguards and all the political beach bums – to pinpoint and kill the menacing shark that took a huge bite out of investor confidence when the Dow Jones Industrial Average tanked 1,000 points in a just a few minutes late in the day on May 6, don't bother to scan the horizon looking for the dorsal fin of some lurking predator.

The threat you fear isn't under the water: It is the water.

We're talking about market liquidity.

For the full story of the stock-market flash crash - and for some cautionary steps to take - please read on...

Question of the Week: Readers Respond to Money Morning's "Flash Crash" Query

The May 6 1000-point drop in the Dow Jones Industrial Average triggered a roar of theories on the cause of the "flash crash." Was it a "fat finger" that entered an incorrect trade, leading automated trading systems to hit a high-frenzied sell mode? Did the initial sell-off fuel panic that escalated sales before manual corrections could be implemented?

As the New York Stock Exchange slowed trading, orders were routed to electronic exchanges that were not operating under the same safeguards and some companies' stocks were briefly valued at just pennies.

The exchanges have agreed to revise circuit breakers designed to stop trading during periods of extreme volatility, and to develop standards for handling erroneous trades. Almost all exchanges admitted that the markets' varying policies on halting trading contributed to the roller coaster ride.

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General Motors: On the Road to Recovery, but Moving Slowly

General Motors Corp. just logged its first quarterly profit since 2007. The company also claims to have paid back its government loans "in full," and is rumored to be interested in buying back its financing arm.

But the truth of the matter is that GM isn't as far down the path to recovery as it would like the public to believe. The company's strong first quarter was greatly aided by Toyota Motor Corp.'s (NYSE ADR: TM) highly publicized recalls. Its claims that it has paid back government debt have been greatly exaggerated. And the United Automobile Workers (UAW) union is already pushing for restoration of many of the perks that it lost during the auto industry's near collapse.

General Motors reported first-quarter profit of $865 million as its revenue surged 40% to $31.5 billion. That made for the company's first quarterly profit in three years. GM – a company that took millions in taxpayer money to remain viable and came close to running out of money in 2008 – reported free cash flow of $1 billion.

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