May 30 - Three data points out Thursday ranging from housing to unemployment to overall economic growth all point to a slower recovery, which means talk of the Federal Reserve soon stepping on the brakes may be overblown. Havovi Cooper reports.
Every day the market wonders...will the Fed wind up its money drops anytime soon? Thursday's verdict: Probably not. The latest data show the economic recovery isn't as robust as many think. A preliminary reading on first-quarter GDP missed estimates. Jobless claims rose last week. Even housing, oh yeah, the sector that has performed so well that some people are now forecasting a bubble...even that disappointed investors. April's drop in pending home sales shows that not all areas of the U.S. are partaking in the housing boom...sales in the south and the West are lagging behind. Chris Whalen of Carrington Investment Services says-read between the lines and the economy doesn't seem so strong. SOUNDBITE: CHRIS WHALEN, HEAD OF INVESTMENT BANKING OPERATIONS, CARRINGTON INVESTMENT SERVICES (ENGLISH) SAYING: "Regardless of what the statistics say, regardless of whether we take food and energy out of the inflation numbers we all know the reality. We're not seeing enormous or any real growth in income but we have rising costs, so consumers are being pressed by those factors and so are corporations." But wait...it can't all be bad news right? After all the S&P 500 is seeing its longest rally in 4 years, with the index up 16 percent year to date. That rally, though, is powered by the Fed. Any talk of curbing the moolah, as we've seen, will result in a sell-off. Yelena Shulyatyeva of BNP Paribas says QE3 is here to stay. SOUNDBITE: YELENA SHULYATYEVA, U.S. ECONOMIST, BNP PARIBAS (ENGLISH) SAYING: "I think the economy still needs Fed's support and just to give an idea, the final sales reading in today's GDP report was revised up to 1.8% from 1.5% in the first quarter and at 1.8 it is still below what the Fed thinks is the potential growth of the economy. So by definition they still need to stimulate the economy." So the million dollar question, or shall we say the 85 billion dollar question is, when will the Fed stop pampering the markets? SOUNDBITE: YELENA SHULYATYEVA, U.S. ECONOMIST, BNP PARIBAS (ENGLISH) SAYING: "Our essential case scenario is that the Fed will not be ready to taper at the September meeting and they'll probably wait until they get slightly more evidence that the economy is doing better. And they'll probably wait until the December meeting to start slightly removing this highly accommodative stance." At the end of the day, the guide post has been given --until the payroll numbers improve Bernanke & gang will have to keep dropping cash into the economy.