Market stability isn’t coming anytime soon! This was another volital week that seems to go up one day and sell off the next. Today’s May Retail Sales figure down 1.2% was the biggest decline in the past 8 months. The key questions going forward are, does this have anything to do with the unemployment rate currently at 9.7% and is the consumer all done spending or will they be back? Retail Sales measures the pulse of the consumer and is a key indicator of how the economy may be doing. On the flip side, it seems that the confidence level of the consumer is doing okay. Consumer Sentiment in June (prelim) was up to 75.5% VS May’s figure of 73.6%.

Mortgage applications decreased 5.7% this past week and is down 30.4% since Memorial Day week last year. This is a huge figure and no doubt directly correlated with the ending of the Home Buyer Tax Credit Program. Many people are concerned about weakness coming back to the housing sector. It is still my opinion that there hasn’t been a better time to buy in the past 20+ years. Mortgage rates have been stable and this is great for the housing market. 30 Year Fixed Rate National average was down alittle to 4.81% and the 15 Year Fixed Rate average rose slightly to 4.26%. Home prices gained .9% in April month over month but, down 2.8% year over year.

Yesterday the market saw it’s 3rd best day in 2010 and was up 273 points. It is my opinion which is also shared with alot of other Wall Streeter’s that you should be buying on the dips and selling into the rallies. This is how I would be trading in a market like this. The days of long term investing is gone for right now and the key is to preserve as much of your capital as possible.

Many things still trouble the markets and a resolution to these things don’t seem likely anytime soon. BP’s Oil Disaster is a huge burden, as well as the potential credit crisis spreading in Europe. However, today’s auction of the Spain and Italy Bonds (which went well) seem to indicate the debt issue may not be as bad as people had expected. The Euro stabilizing is another positive sign. I feel gold hitting an all time high on Tuesday $1,245 an ounce is an extremely negative factor hanging over the market and an indication that the market / people feel the debt crisis may not be over. I still believe that if you want our economy to grow we have to stop the massive government spending and cut taxes across the board to promote growth. Since this isn’t the way the current administration is heading (actually directly the opposite) we may be in for some turbulent times ahead.

Big sell off as a weak Jobs Report casts a dark cloud over Wall Street! This seems as though its exactly were we left off last month after seeing the worst decline for the month of May since 1962! This week was all about the continuation of BP‘s Oil Spill Disaster, Jobs Report, and Housing Data.

Today’s Jobs Report was a disappointing figure. The market opened lower this morning with this terrible number and the sell off continued to accelerate throughout the day dropping below 10,000 down 310 points to 9,946. The Department of Labor said that Jobs grew by 431,000 in May but, went on to say that nearly all those jobs were temporary census workers. There were 411,000 census workers added and only 41,000 private sector jobs created. The unemployment rate dipped slightly to 9.7% however there are still 4.66 million continuing to receive jobless benefits. I find this figure to be a huge smoke screen! Why should temporary work be classified as employment? Isn’t the goal of employment to be employed for a long period of time? What happens when this work ends? Will these people then be able to file for unemployment? Sounds like a horrible scenario to me!

Pending Home Sales were up 6% in April and the Index is up 22.4% year over year. Pending Home Sales in the Northeast were up 29.5% in the month of April. These are contracts signed not closed. Many Realtor’s surveyed are unsure if these homes will closes by the June 30th Home Buyer Tax Credit deadline due to the overwhelming amount of short sales and appraisals that are taking longer than expected. May will be the 1st month in 16 months that the Government isn’t paying people to buy homes. I have been saying for quite a long time that these numbers are lagging indicators (old data) and the real news will be what happens after the June 30th date.

Mortgage applications to purchase homes dropped 4.1% this past week. It was down the 4th straight week and down a staggering 40% from last month which is the lowest level since April of 1997! Mortgage rates remain low which is good for the housing market. The 30 year fixed rate national average is at 4.625% and the 15 year fixed rate average is 4.125%.

Out of all the news, I think the most disturbing is the continued failed efforts by BP to stop the oil from pouring into the Gulf of Mexico. I just can’t fathom why it has taken so long to get this thing shut off? It’s also baffling that the oil industry as a whole doesn’t have methods in place for times like these when things go horribly wrong. My heart goes out to all those people in the Gulf that are affected. It’s a terrible situation with no real answer of what the long term effects will be.

Looking ahead we have some big challenges to be dealt with. For me, a major question is how long this economy can run effectively not running on all 8 cylinders? I think there are some major issues abroad in Europe with the credit issues looming to other countries and in China that need to be addressed! What happens if China Real Estate Market (bubble) experiences a similar situation we did in the U.S.?

The employment issue is defiantly a problem as well. The Government needs to give back to small business to encourage employment. That is the only way to grow our economy. Entitlement programs need to be cut, extending unemployment benefits is not the way to get people back to work.

The long term affects of this oil disaster will also have a huge impact moving forward. The amount of work that could be lost along the Gulf Coast could be catastrophic! Some analysts say the loss of jobs alone in the tourism industry could be greater than the fishing industry as a whole. That is a scary thought! I pray that the efforts are successful and things can get back to some sort of normality for these folks.

As goes the economy so does the market? It has seemed like a popular trend the month of May which has seen the DOW down 7.9%! The markets volatility has become an everyday occurrence. Ending the week pretty much flat but, giving you an ulcer if you happen to follow the markets. This was the worst May the Stock Market has seen since 1962! The $64,000 question on the street is whether or not we go into a double dip recession and or if European Credit Crisis spreads into other countries. To top it off with recent issues with North Korea, we can see what is troubling the markets.

The good side of all this is that oil has back off recent highs falling to around $73.50 a barrel. Rates have remained low, which is great for the housing market. The 30 year fixed rate national average is at 4.80% and the 15 year fixed rate average is 4.25%. The troubling news is that the purchase application index fell again this week 3.3% and after last weeks fall of 27.1% Existing Home Sales jumped to 5 month highs in April up 7.6%. Inventories were up 8.4% month supply and sales were up 21.1% in the Northeast year over year. 1st time home buyers accounted for 1/2 of the people buying. These are all lagging indicators and old data. It is pretty clear that the end of the Home Buyer Tax Credit Program had a tremendous effect on the housing market. I feel as though that is a bad thing because the problem going forward is, what is going to stimulate people now? The question now will be what happens in May and June?

Consumer Confidence Index was at 63.3% in May vs. April’s reading of 57.7% The next month will give us a great gauge on what the future has in store for us. The keys going forward will be the Unemployment Rate and the pulse of the consumer. Consumer Spending was unchanged for the month of April and the first time jobless claims fell 460,000 down 14,000. Consumer Sentiment for May was 73.6 which was better than expected. This measures the consumers mood.

My issue is that the way out of a financial problem is for the Government to cut taxes on business which gives the private sector an incentive to expand and create more jobs. It is clear that the unemployment rate which is currently at 9.8% will not be decreasing anytime soon. The Government can not expect prosperity by creating temporary employment like they have with the census workers. The way to economic prosperity is to encourage productivity and innovations. That leads to better products and services which then creates jobs.

Greg Afarian’s Market Report week of May 17 to the 21st. It seems that volatility is a common trend these days on Wall Street. The Market and Stocks got hammered again this week on worries of a Global slow down, problems looming in Europe and China, and more financial regulation in Washington. It is clear these factor have a dark cloud over the Markets and are effecting them. Stocks hit 3 month lows this week as the Dow plunged 356 points during trading on Thursday. The Dow Closed up 60 points but down 480 points for the week to 10,150. Gold is also down this week to $1,178 an ounce as Oil gets crushed to $69.84 a barrel. Crude is down 20% in the past month as a global double dip recession theory is now on the table.

Consumer Price Index fell in April to .1% and the core rate excluding food / energy it was unchanged. The Consumer Price Index measures and estimates the average price of consumer goods and services purchased by households. This was the smallest gain since 1996 and the word on the street is, could this be a sign of Deflation? Deflation is when prices of goods and services fall faster than the inflation rate which then allows consumers to get more for there dollar.

Housing Starts were better than expected for the month of April up 5.8%. Housing Starts is when the construction actually begins. New Building Permits also came out this week was down 11.5% for the month of April. Many analysts are now starting to say that the housing numbers are going to be greatly impacted by the end of the Home Buyer Tax Credit Program. I have been call this for quite sometime now and the numbers speak for themselves as weekly mortgage applications for purchases fell a whopping 27.1% this was the biggest drop in 13 years!

30 Year Fixed Rates fell this week to 4.83% and the 15 Year Fixed Rate fell to 4.19%. The Fed revised their Gross Domestic Product figures for 2010 to 3.45% vs. previous estimates of 3.15% and real GDP to grow to 4% in 2011 & 2012. The Fed also estimated that unemployment would drop to 9.3% in the 4th quarter of 2010 and fall to 7.05% by the end of 2012. These are aggressive numbers considering that the market seems to be pricing in a double dip recession.

I think we are still not out of the woods. Since many of these economic figures are lagging indicators we’ll only know what happens as we start to move forward from this point. I feel some major problems we are going to have to deal with is Europe and how this Greece situation may effect other countries. China! If their housing market crashes what will the implications be and how that will ripple through the markets? We can’t forget Washington and their crusade to over regulate! This is no doubt a huge negative for the Markets and the more they tinker with policies the least likely things will be better than they are. Criminals always find a loophole, the only thing over regulating does is that it creates larger institutions and discourages the small guy to compete.

Greg Afarian’s Market Report week of April 4th through the 9th

This week we saw testimony on Capitol Hill regarding the mortgage crisis as committee members questioned former Fed Chairman Allen Greenspan, former U.S. Treasury Secretary Robert Runin, Ex Citigroup CEO Chick Prince. It is upsetting to still be talking about this issue. The problem was that greed / corruption got the better part of alot of people and we are all now paying the price.

Oil hit $87 a barrel this week settling to $84.89 and Gold has been up as well reaching $1,161. These are two key inflationary signs but, the Fed will probably have the blinders on regarding rates due to the higher risk of slower
growth. The Stock Market is doing quite well as it approaches 11,000 and could be seen as a Bullish sign. Many people on Wall Street are calling for the end of the recession. Last weeks Jobless Claims Number might be a strong argument. But, if you look at the numbers closely you would see that out of the 162,000 jobs added nearly 60,000 of them are temporary jobs added for the census. Economist bragging over this figure (the biggest gain in 3 years) really should look deeper into the numbers. The Unemployment Rate in the United Sates is still 9.7%.

30 Year Fixed Rate Mortgage Rates rose dramatically this week due to an auction of 10 Year Treasury Notes. The 30 Year Fixed Rate average rose to 5.31% up from 5.04% last week. The 15 Year Fixed Rate was up as well to 4.54% from last weeks 4.34%

Existing Home Sales last week fell for the 3rd straight month as inventories grew 9.5% to 3.59 Million Units and a 8.6 month supply. What is surprising is that 27% of all purchases are cash transactions. New Home Sales in February were down 2.2%, it was expected to go up 1.9% and in January New Home Sales (new construction) was down 8.9%.