Lukewarm would be one way to describe the minutes from the Federal Open Market Committee's August meeting, in which the heads of U.S. monetary policy wrestled over how to handle inflation, a slower consumer and the continuing problems in the housing market.
The Fed generally sees the next rate move as tightening, and voiced concern about the spending slowdown as well as inflation not receding into 2009.
Pressures on government-sponsored enterprises remain and the Fed sees higher mortgage rates as potentially increasing the troubles in the housing crisis. The minutes also noted that exports were a big source of stimulus, but that could subside.
Moderating declines in home sales offered a measure of hope to Wall Street on Tuesday, as did a rise in consumer confidence in August.
The S&P/Case-Shiller 20-city home price index fell fell 0.5% from May to June, while the 10-city index fell 0.6% over the month. That's a slower pace than the 2.0% to 2.5% monthly drops seen earlier in 2008.
Still, the latest reading offers little hope the slumping housing market will firm up in the near term.
"While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level," says David M. Blitzer, chairman of the index committee at Standard & Poor's.
Separately, the Commerce Department reported that new home sales rose 2.4% in July, well ahead of the 1.0% drop Wall Street had expected.
Wall Street treaded water. In what was expected to be another volatile, low-volume session ahead of the Labor Day break, the Dow Jones industrial average was effectively flat, losting only 2.77 points, or 0.02%, to 11,383.48. The S&P 500 lost 0.8 points, or 0.1%, to 1,266.04, while the Nasdaq was down 0.5%, or 12.53, to 2,353.06.
The yield on the benchmark 10-year Treasury note rose to 3.81% from 3.79% late Monday.
For the year through May, the Case-Shiller 20-city index was off 15.9% to 167.69, the 18th consecutive month of yearly price declines, but less than the consensus estimate for a drop of 16.2%, according to TradeTheNews.com.
The 10-city index fell even further for the year, declining a record 17.0% to 180.38.
Las Vegas and Miami continued to post the steepest year-to-date declines, of 28.6% and 28.3%, respectively.
Phoenix, which posted the third-largest yearly decline, was the worst performer for the May to June period, with sales declining 2.6% over the month. Denver and Boston were the best performing markets for the month, posting increases of 1.5% and 1.2% respectively.
The Conference Board reported that August consumer confidence came in at 56.9, well ahead of the 52.4 anticipated by Wall Street and July's reading of 51.9.
The increase marks the second month in a row that sentiment inched up after a six-month slide since January. August's change comes while oil prices have fallen from July's record levels, and despite the continued deterioration in the labor market.
By Carl Gutierrez |
