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U.S. Economy

Money Morning Mid-Year Forecast: The Dollar Headed for Some Change 

In spite of an assortment of economic uncertainties at home, the U.S. dollar has been the star of the currency world for most of 2010. Spooked by persistent and seemingly insurmountable debt problems east of the Atlantic and the specter of unsustainable growth and potential inflation on the Pacific side of the globe, savers and investors fled European and Asian currencies for the relative safe haven of the dollar.

As Keith Fitz-Gerald, Money Morning's Chief Investment Strategist, pointed out last week (June 10), from January through May, the dollar gained ground against all but two of the world's leading currencies – China's yuan and the Japanese yen – and it retained parity with them. The greenback appreciated by as much as 16% versus the struggling euro, which last week (June 8) briefly dipped to a four-year low below $1.20, and 13% against the British pound.

The InterContinental Exchange's (ICE) U.S. Dollar Index (USDX), which measures the dollar's value versus a trade-weighted basket of six leading foreign currencies, climbed from a low of 76.732 on Jan. 14, 2010, to an intra-day high of 88.586 on June 8.

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Taipan Daily: What Happens When Peter Wants His Money Back?

FedEx's unfunded pension problem gives us a clear look at the troubles lurking just around the corner for those who borrowed their way through the recession. Is the recession truly over? It may seem somewhat late to be asking that question. After all, haven't Washington and Wall Street already bragged as to how we have […]

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Bull Market Update: U.S. Stocks Are Hanging By a Thread – But It's a Tough Thread

If you ask me, the current bull market in U.S. stocks is hanging by a thread.

In fact, a decline that takes the Standard & Poor's 500 Index down below the 1,040 level – roughly 7% below where it closed yesterday (Wednesday) – would probably murder the bull-market case for stocks.

But until that decline actually occurs, don't rule the bulls out for the count.

That "thread" may be tougher than you think.

To see what's in store for U.S. stocks, please read on…

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The U.S. Economic Recovery is on Cruise Control

Assessing the U.S. economic recovery right now is a bit like buying a used car: Although it sure looks good, you can't help but wonder what's really going on under the hood.

In terms of the U.S. recovery, here's what I see: The U.S. economic recovery looks good. And it is good. But the pace of that recovery is about to slow down – which is part of the reason that the U.S. stock market sold off and why the Dow Jones Industrial Average is down about 7% from where it was in early May (and that's even after the 5% rebound the Dow has seen from the June 7 nadir it established down around 9,800).

To put this into context, I had a long discussion about this topic with Lakshman Achuthan, managing director of the Economic Cycle Research Institute. Let me share his thoughts.

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Are You Worried About Stocks? The U.S. Housing Market Should Be Your Real Concern

According to the latest reports on the U.S. housing market, the 96,400 homes hit with default notices last month were 7% less than in April and 22% less than in May 2009.

And that's not all. Foreclosure auctions were scheduled for the first time on 132,680 properties last month – 4% fewer than the month before and 16% fewer than in May a year ago, according to the Irvine, California-based RealtyTrac Inc.

In fact, foreclosure filings of all types – default notices, scheduled auctions and bank repossessions – were reported on 322,920 U.S. properties in May, a decline of 3%. All told, this latest report seems to have painted a picture of a gentle and steady recovery for the embattled U.S. housing market.

Unfortunately, these figures are quite deceptive – as is the reassuring portrait they helped create. Despite the apparent improvement in the foreclosure figures, there exist some dangerous undercurrents that threaten to further drag down U.S. housing prices – as well as U.S. investors.

To discover the "real" state of the U.S. housing market, read on…

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Defensive Investing: Seven Signs Your Dividend is in Trouble

Both the U.S. stock market and the U.S. economy are navigating rough waters right now.

U.S. employment, which had appeared to be moving into rapid expansion, suffered a setback in May, with the economy creating only 41,000 jobs. Meanwhile, the stock market – even with the recent rebound that brought it back to the 10,000 level – remains more than 15% below its cyclical high.

That's been the uncomfortable pattern: One economic report points toward a continued U.S. recovery; the next one points toward recession. Sometimes the contradictory research is separated by a single day, other times they are just hours apart. The resultant uncertainty is whipsawing U.S. stock prices – and is leaving investors feeling shaky.

Fortunately, there is a ready remedy, not to mention a place of refuge, from this kind of grinding uncertainty – high-yielding dividend stocks.

To discover the seven signs that a dividend isn't secure, please read on...

Unexpected Drop in Retail Sales a Sign of Trouble For Economic Recovery

Sales at U.S. retailers unexpectedly dropped in May for the first time since September, the Commerce Department said Friday, raising worries that the economy is struggling to recover from the worst financial meltdown since the Great Depression.

Americans slashed spending on everything from cars to clothing to building materials, as retail sales plunged 1.2% last month, following a 0.6% April gain that was larger than previously estimated.  It was the largest decline in eight months.

Retail sales were projected to increase 0.2%, according to the median estimate of 76 economists in a Bloomberg News survey.

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Hot Stocks: Wal-Mart Stores Inc. (NYSE WMT) Proves that the Best Defense is an Active Offense

Wal-Mart Stores Inc. (NYSE WMT) has the reputation of being a defensive stock, but lately the company has gone on the offensive. For that reason, it's a good candidate to break out of its recent slump and head higher.

Wal-Mart has been among the stocks to lose ground in the recent market correction. But with more than $400 billion in annual sales, the world's largest retailer is still one of the soundest plays an investor can make – particularly in times of uncertainty.

In the year and a half stretching from January 2008 to June 2009, Wal-Mart stock managed a 3.45% gain despite being interrupted by one of the worst stock market plunges in history.

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Moribund Sentiment Is Jeopardizing the U.S. Stock Market

The U.S. stock market is really at a critical juncture right now.

I'm all for being optimistic at the prospect of a super-oversold condition amid rampant pessimism. But bulls need to take charge of the controls of this sputtering plane. But now that they failed to yank the stick higher before the February lows, the bottom is really in danger of falling out.  

Most corrosive for the major indexes' value at present are large-cap energy and bank stocks, which have fallen 7% as a group amid a hex from the BP PLC (NYSE ADR: BP) blowout and financial regulation clampdown.  

You would think that a cut in oil supply from the Gulf of Mexico would provide a strong undertow for energy, at least, but investors have been acting like industrial demand will grind to a halt in coming months.

June historically has been the second worst month of the year, after September. But after suffering through the worst May since 1940, and bearish sentiment on overdrive, it's fair to expect opportunistic investors to dive in now and take advantage of bargains.

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These Five Inflation Plays Will Provide Protection and Profits

Inflation hawks have been warning since 2008 that the spurt of U.S. money creation that began at the end of that year would spark a surge in consumer-price inflation.

And yet the consumer price index (CPI) statistics remain quiet – not giving ammunition to the deflationary camp, but making "inflationists" look silly, as well. Now, however, it is becoming obvious that inflation will soon arrive. But this time it is sneaking in through the back door – courtesy of our emerging-market trading partners.

Fortunately, there are some very clear steps that investors can take to protect themselves from this expected inflationary surge.

To learn about five investments that can battle inflation even as they fatten your portfolio, please read on...