Fed Chairman Alan Greenspan's testimony before the House Financial Services
Committee set the tone for the week. While he gave a balanced testimony as usual, he indicated that the risks remained weighted
towards weakness -- the U.S. economy is not quite out of the woods. He indicated that inflation was not a problem even though the CPI
figures were creeping upward, as other measures showed greater stability in prices. Greenspan brightened the outlook for bond investors
by suggesting that the Fed was ready to ease again should conditions warrant, perhaps reducing the federal funds rate target another 25
basis points in August. Equity investors weren't heartened by this news since it puts off profitability to a further date in the future.
On the whole, this week's economic indicators didn't reveal anything new about the
economy: the housing sector remains healthy and industrial production remains in a slump. The international trade deficit narrowed in May
- and this could help boost GDP growth in the second quarter. Nevertheless, the drop in imports points to continued weakness in domestic
demand.
Markets at a Glance Recap of US Markets The Economy The Bottom Line Looking Ahead
|