Greg Afarian’s Market Report Week of July 12th to the 16th, Is Deflation in our Future?

Dow Jones Trading Floor

Greg Afarian’s Market Report Week of July 12th to the 16th. Not a ton of economic news this week and the Dow traded flat for the week. Producer Price Index came out this week, which measures inflation on the consumer’s side and it was down .5% for June. Excluding food and energy the core rate was up .1%. This was a better than expected number and shows that inflation at the current time is not an issue. Many people are questioning if deflation might be an issue but, at the current moment that is unlikely.

Jobless Claims for people that are filing for their 1st time week ending July 10th was down 31,000 to 429,000. That was also a better than expected number but the number that I thought was concerning was the continuing claims figure which was up to 4.681 Million vs. 4.4 Million the prior week.

Falling home prices, 24% of all sellers on the market say they have dropped prices at least once since 7/1. That is a 9% increase from June! 30 year fixed rates are stable at 4.69% and the 15 year fixed rate is at 4.12%

Interesting news, iphone 4 is it a lemon? Yankees Owner George Steinbrenner dies at the age of 80. Bought the Yankees in 1973 for $8.7 Million now worth more that 1 Billion plus 2 other companies work well over another Billion!China growth slows to 10.3% in Quarter 2 and better than expected inflation numbers for them makes it seem things are pretty well in check.

My final thoughts…. Deflation is the big risk even though it may be unlikely. The $64,000 question is with very little inflation and rates at record lows how is the Fed going to engineer a successful exit strategy with what we call a “Soft Landing”. What they will eventually have to do is start-raising rates and the question will be how the markets react when that happens. I still feel that we need to keep rates low to help businesses and consumers. You also need to keep taxes low so that Americans to help consumers to continue to spend. I wouldn’t want to repeat what happened in the early 2000’s and if history does repeat itself that could be a bad situation for everyone!