Stocks slip and Treasuries make back ground on Economic Data

Stocks fell on fears of a slowing down of a global economic recovery and treasuries posted a gain this week trimming down the years losses.

On Dec. 16th Federal Reserve officials stated that the US economy isn’t improving enough for them to raise rates from a record low. According to Harvard University professor, Martin Feldstein, the economy is still in a recession, and home prices may very well resume their decline. It will be some time before we have sufficient data to point to an end of the recession. Mr. Feldstein is a member of the Business Cycle Dating Committee, the panel charged with determining when the recession has ended. Committee chairman Robert Hall disagrees with Mr. Feldstein, and believes the recession ended early this month. He cites the US cut of 11,000 jobs by employers in November, the fewest in 23 months. The US Unemployment rate fell from 10.2% to 10% on December 4th. The economy has lost 7.2 million jobs since the begin of the recession in December of 2007.

Gross Domestic Product expanded 2.8% third quarter as opposed to shrinking in the previous three quarters. Growth will average 2.6 percent next year, according to the median forecast in a Bloomberg News survey of economists early this month. Restrained consumer spending expected in 2010 suggests this is still going to be a pretty weak year. Being thrifty in the long run can be a good thing, but as you come out of a recession it can be a drag on the economy.

Lenders modified 31,382 mortgages of the 4 million targeted for loan relief under the Obama Administration. Feldstein believes the danger here is that we could run out of steam.

In a sign that growth will extend into the first half of 2010, the index of leading economic indicators rose for the eighth consecutive month in November.

Manufacturing in the Philadelphia area expanded in December for the fourth straight month led by sales and employment gains. Philadelphia’s general economic index climbed to 20.4 this month. Readings greater than zero indicate growth.

So there you have it, a plethora of pretty good economic data, but I am like Mr. Feldstein, I think it is way too early to declare a victory on recession yet. But end or not, you cannot deny this data is good news, and it is certainly encouraging whichever camp you are in.

US Treasuries ended the week as follows:

30yr Bond 4.46%

10yr Bond 3.55%

5yr Bond 2.28%