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Economic news for the U.S. was mixed but mostly positive this past week. But worries about Greek sovereign debt weighed heavily on equity markets.
 It was the worst week for major indexes in 2012. Equities dropped sharply this past week, largely on developments (or lack of) in Europe.
On Monday, stocks followed those in Europe and the Asia Pacific downward after weekend attempts to form a new government in Greece failed. The lack of resolution on forming a government boosted fears that Greece might be forced to leave the Eurozone. This more than offset the reserve requirement easing by the Peoples Bank of China over the weekend.
Tuesday, worries over Greece continued to push stocks down as another effort to form a government failed, leading to a second election in mid-June and leading to stalemate on debt progress. Helping slow the day’s drop in stocks was an unexpectedly favorable Empire State manufacturing report. Retail sales also looked healthy.
At mid-week, better-than-expected housing starts and industrial production provided lift early in the trading session. But again, worries over Greece took center stage and bumped equities down. A coalition government could not be formed. Also, there were reports of vast sums of money being withdrawn from Greek banks as the viability of those banks has been increasingly questioned. Thursday, jitters over Greece continued but the big downdraft came from a Philly Fed manufacturing index that unexpectedly turned negative.
At week’s close, stocks fell again. Despite the hoopla over the Facebook IPO (a record $16 billion), equities swooned on worries over European sovereign debt. A downgrade by Moody’s Thursday of 16 Spanish banks added to the downward move. Also, there was increased chatter of the likelihood of Greece leaving the Eurozone.
Equities were down sharply this past week. The Dow was down 3.5 percent; the S&P 500, down 4.3 percent; the Nasdaq, down 5.3 percent; the Russell 2000, down 5.4 percent; and the Wilshire 5000, down 4.6 percent.
For the year-to-date, major indexes are up as follows: the Dow, up 1.2 percent; the S&P 500, up 3.0 percent; the Nasdaq, up 6.7 percent; the Russell 2000, up 0.9 percent; and the Wilshire 5000, up 2.8 percent.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
 Treasury yields declined significantly this past week on flight to safety. Basically, the same worries that pushed equities down sent most yields on Treasuries down for the week. Lack of progress in forming a coalition government in Greece sent funds into the safety of U.S. Treasuries.
And there were contagion fears of what will happen if either Greece is forced to leave the Eurozone or Greek banks fail. Funds flowed out of Greece on worries of devaluation if Greece leaves the Eurozone.
 On Thursday, rates were bumped lower in addition by the negative report from the Philly Fed. The 10-year Treasury yield hit a record low Thursday before edging up marginally Friday.
Due to flight to quality over Greek worries, U.S. rates are back down to or below yields seen during the worst of the recent U.S. financial crisis.
For this past week Treasury rates were mostly down as follows: 3-month T-bill, down 1 basis point; the 2-year note, up 3 basis points; the 5-year note, down 1 basis point; the 7-year note, down 9 basis points; the 10-year note, down 13 basis points; and the 30-year bond, down 22 basis points.
 The spot price of oil continued its May swoon. Greek worries played a key role as prices declined on concern that bad outcomes would undermine global economic growth due to financial contagion. Other factors coming into play included comments on Sunday by a Saudi oil minister that prices should come down. Saudi Arabia has boosted output substantially. At mid-week, a jump in inventories of crude led prices down with a disappointing Philly Fed report nudging spot West Texas Intermediate down further on Thursday.
Net for the week, the spot price for West Texas Intermediate fell a sharp $4.65 per barrel to settle at $91.48.
Economic news was mixed this past week but mostly positive.
 The consumer is still contributing to the recovery. However the latest sales numbers were soft but following strong gains the prior three months. Retail sales in April rose 0.1 percent, following a 0.7 percent increase the month before.
Motor vehicle sales lifted the broad number, gaining 0.5 percent in April after a 0.2 percent gain the month before.
Excluding motor vehicles, retail sales increased 0.1, following a 0.8 percent boost in March (originally up 0.8 percent). Gasoline sales tugged down, declining 0.3 percent, following a 1.0 percent jump in March.
Sales excluding autos and gasoline in April edged up 0.1 percent, following a 0.8 percent boost the prior month. Core components were mixed with strength in nonstore retailers; furniture & home furnishings; and sporting goods, hobby, book & music stores. Weakness was led by building materials & garden supplies and clothing.
Retail sales on a year-ago basis in April posted at up 6.4 percent, compared to 6.6 percent in March. Excluding motor vehicles, sales were up 5.9 percent on a year-on-year basis, compared to 6.4 percent the prior month.
The bottom line is that sales held up decently in April after a strong first quarter. The high level of sales at the end of the first quarter actually puts second quarter growth in a strong position, comparing quarterly average growth which is what GDP essentially measures. Unless retail sales weaken, PCE growth is likely to be healthy for the current quarter.
 A lot has been made of an atypically warm winter causing spring activity to be moved forward. And housing indicators had been at risk of declining in the spring after relatively strong winter numbers. But housing starts are suggesting that warm weather was not the only factor behind good numbers—the sector actually is improving, albeit very gradually.
Housing starts rebounded 2.6 percent in April after declining 2.6 percent in March. The April pace of 0.717 million units posted higher than analysts' forecast for 0.690 million and is up 29.9 percent on a year-ago basis. In April, the comeback was led by the multifamily component but single-family also was healthy.
 By region, the rebound in starts reflected an 11.6 percent increase in the South with the Midwest rising 6.7 percent. Weakness was seen with declines in the Northeast, down 20.7 percent, and the West, down 8.1 percent.
Looking ahead, housing permits declined in April but followed a surge in March. Permits declined 7.0 percent, following an 8.8 percent increase in March. The April reading of 0.715 million units came in marginally short of the consensus estimate of 0.725 million. Weakness was seen in the multifamily component in April while the single-family component improved. The multifamily component is quite volatile.
Overall, the average trend for housing starts and permits is gradual improvement. While the level of activity is still very soft, the trend is in the right direction. And until employment strengthens further, this sector is going to remain sluggish. Sales heavily depend on job hopping. But demand for a larger housing sector even more depends on household formation—and that is still a function of job creation to a large degree.
 Manufacturing numbers in March (and other data) raised questions on whether the economy was stalling. But industrial production picked up some steam again in April, indicating that the recovery is still on track. While utilities played a key role, manufacturing made a nice rebound. Overall industrial production jumped 1.1 percent, following a decline of 0.6 percent in March.
 By major components, manufacturing rebounded 0.6 percent, following a 0.5 percent decrease in March. Motor vehicles led manufacturing with a 3.9 percent monthly surge after a 1.2 percent rise in March. Still, manufacturing excluding motor vehicles gained 0.3 percent, following a 0.6 percent dip the month before.
In April, utilities output jumped 4.5 percent. Atypically warm weather held down utilities output in the first quarter and April's number reflects a return to a normal trend. Mining output increased 1.6 percent.
Overall capacity utilization improved to 79.2 percent from 78.4 percent in March.
April manufacturing turned out to be moderately strong despite some adverse indications from regional surveys. And again, the latest regional surveys for May are pointing in different directions.
 The New York Fed’s latest survey on manufacturing is moderately positive. In contrast, the Philly Fed survey is decidedly negative for May.
Activity definitely picked up in May in New York State as the New York Fed’s index on general business conditions rose 10.53 points to 17.09. New orders show mild acceleration, rising from 6.48 to 8.32. Shipments show heavy month-to-month acceleration.
Employment numbers are strengthening further and inventories are up.
The Philly Fed report for May, however, was notably negative. The business activity index dropped to minus 5.8 from plus 8.5 in April. New orders were discouraging as the index fell 3.9 points to minus 1.2, indicating mild contraction for May.
The employment index turned negative and delivery times shortened dramatically to indicate slowing activity in the supply chain.
Optimism in the six-month outlook is down noticeably.
 CPI inflation in April slowed sharply on lower energy costs. Meanwhile, the core rate held steady. The consumer price index posted at unchanged in April after a 0.3 percent boost the prior month. Excluding food and energy, the CPI rose 0.2 percent, matching the March pace.
By major components, energy fell 1.7 percent after jumping 0.9 percent in March. Gasoline dropped 2.6 percent, following a 1.7 percent rise the prior month. Food price inflation held steady at 0.2 percent.
 Within the core, apparel prices posted a notable gain while recreation declined. New and used vehicles saw notable increases in prices.
Year-on-year, overall CPI inflation softened to 2.3 percent from 2.6 percent in March (seasonally adjusted). The core rate stayed 2.3 percent on a year-ago basis.
With recent help from energy, headline numbers are headed toward the Fed's inflation goal of 2 percent. However, the core rate has been a little stubborn and will provide ammunition for the inflation hawks on the FOMC.
 Forward looking indicators were not so optimistic in April as earlier in the year. The Conference Board’s index of leading indicators declined 0.1 percent, following a 0.3 percent rise in March and 0.7 percent boost in February.
The two biggest negatives in April were building permits and initial jobless claims, with negative percentage contributions of 0.20 and 0.19, respectively. Permits and claims were strong positives for this report through much of the first quarter, so the April dip is not so disconcerting. Consumer expectations are April's third biggest negative but recently lower gasoline prices may lead to improvement. However, an early read on expectations in consumer sentiment for May indicates that is not happening yet.
The positives in the report were once again led by the spread between short and long rates, a spread made favorable by the Fed's near zero rate policy. This component added 0.20 percentage points to the April index. Indications on factory orders and credit conditions were also positive.
The latest leading indicator report is a tough read. Yes, the dip in April follows two healthy months, and permits and initial jobless claims have been on modest positive trends. But worries about Greek debt and recession in portions of Europe are keeping businesses and consumers cautious.
The latest FOMC minutes for the April 24-25 meeting indicated that there was at least incremental inclination for QE3 if the economy loses momentum. Instead of “a couple” of participants being in favor of additional ease if the economy worsens as seen in the minutes of the March meeting, it now is “several.” However, this does not change the fact that most members are emphasizing costs likely outweighing benefits of such a move.
Also, more recent economic data have been more positive and monetary policy currently is still extremely loose. The Fed continues to state that exceptionally low policy rates are likely through 2014. So, the condition of a worsening economy is not happening, meaning QE3 is not going to be implemented. Of note, St. Louis Fed President James Bullard in a speech this afternoon specifically pointed out the improvement in economic news for the U.S. economy.
The minutes add little to the known Fed outlook for the economy as the FOMC released relatively detailed forecast numbers just before the chairman’s press conference on April 25. The Fed still sees moderate growth in coming quarters and a gradual decline in unemployment.
The Fed still sees headwinds from Europe and a possible fiscal cliff.
Of course, Richmond Fed President Jeffrey Lacker dissented again on the statement, indicating that he believes rates will need to go up before the end of 2014.
The recovery is still on a low trajectory. This makes the softer monthly numbers stand out more than if the uptrend were stronger. The majority of recent data has been positive and suggests continued recovery. Still, problems in Europe continue to batter financial markets.
Housing is this week’s focus, starting with existing home sales on Tuesday and new home sales and FHFA at mid-week. Manufacturing updates post with Richmond Fed on Tuesday and then the key durables orders report Thursday along with the Kansas City Fed survey. The week closes with Friday’s consumer sentiment report.
Existing home sales in March came in softer than expected, posting at a 4.48 million unit pace, compared to a marginally revised 4.60 million units the prior month. Sales dipped 2.6 percent, following a 0.6 percent slip in February and 5.7 percent surge in January. Despite the dip in sales, a 2.5 percent decrease in supply on the market kept the months’ supply steady at 6.3.
Existing home sales Consensus Forecast for April 12: 4.66 million-unit rate
Range: 4.50 to 4.85 million-unit rate
The Richmond Fed manufacturing index rose seven points in April to 14. Growth in new orders rose in the month while shipments surged.
Richmond Fed manufacturing index Consensus Forecast for May 12: 11
Range: 3 to 15
New home sales came in at a 328,000 unit annual rate in March, slightly more than expected—largely due to upward revisions to prior months. February was revised 40,000 higher to 353,000 and January was revised up 11,000 to 329,000. It has taken a while but supply is finally looking in line. Supply of new homes on the market stood at 5.3 months from February's 5.0.
New home sales Consensus Forecast for April 12: 335 thousand-unit annual rate
Range: 325 thousand to 355 thousand-unit annual rate
The FHFA purchase only house price index in February rose 0.3 percent, following a 0.4 percent decline in January. On a year-on-year basis, the FHFA HPI was up 0.4 percent versus down 1.2 percent in January.
FHFA purchase only house price index Consensus Forecast for March 12: +0.3 percent
Range: +0.1 to +0.7 percent
Durable goods ordersdeclined 3.9 percent in March after a 2.0 percent rebound the previous month. Excluding transportation, durables posted a 1.3 percent decrease after a 1.8 percent increase in February. Consensus notes numbers include annual revisions released May 18.
The transportation component plunged a monthly 9.9 percent in March after rising 2.6 percent the month before. Subcomponent weakness was led by a 43.6 percent plunge in new orders for nondefense aircraft (Boeing orders). Outside of transportation, declines were broad based.
New orders for durable goods Consensus Forecast for April 12: +0.5 percent
Range: -1.4 percent to +2.6 percent
New orders for durable goods, ex-trans., Consensus Forecast for April 12: +0.7 percent
Range: -0.2 percent to +1.5 percent
Initial jobless claims were unchanged in the May 12 week at 370,000. The May 5 week, which was revised slightly upward, was also at 370,000 while the week before that, the April 28 week, was at 368,000. The four-week average was down sizably for a second week, down 4,750 to 375,000. Continuing claims have been trending strongly lower though the latest data showed a small rise to 3.265 million. But the four-week average was down slightly to 3.283 million.
Jobless Claims Consensus Forecast for 5/19/12: 371,000
Range: 361,000 to 378,000
The Kansas City Fed manufacturing index posted at 3 in April, down from 9 in March and 13 in February. Manufacturing growth eased in most durable and nondurable goods-producing plants, with the exception of fabricated metal, plastics, and rubber products. Other month-over-month indexes also slowed in April. The production index dropped from 13 to 0, and the shipments, new orders, and order backlog indexes also fell. In contrast, the employment index remained unchanged, and the new orders for exports index edged up slightly.
No consensus is available this month
The Reuter's/University of Michigan's consumer sentiment index in early May was up a solid 1.4 points at mid-month to a preliminary 77.8 versus April's 76.4. The latest reading edged out February 2011 for the best reading so far of the recovery. The latest report showed a decline in the expectations component, which is now off recovery highs with a six tenth dip to 71.7. Optimism over the future is limited, a factor that limits consumer spending. The good news in the report was a rise in the assessment of current conditions, up a very strong 4.4 points to a recovery best 87.3.
Consumer sentiment Consensus Forecast for final May 12: 77.8
Range: 76.0 to 79.5
SIFMA Recommended Early Close 2:00 ET
R. Mark Rogers is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books, 2009.
Econoday Senior Writer Mark Pender contributed to this article.
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