Market Update

Last week stock markets reacted to higher crude oil, weak earnings and inflation concerns which sent stocks down.  The Dow lost 4.2% for the week.  Several inflation protection assets (gold, TIPS, international bonds) performed well.

In terms of economic developments, tax rebates appear to have stimulated spending in May but rising food and energy prices are impacting consumer confidence.  Factories appear to be holding up better than the 2001 recession; jobless claims have moved higher and durable goods were flat in May.  The TED SPREAD declined to -1.14%, from -0.86% the week prior, a reminder of the ongoing credit market challenges.

The Fed's comments during the week included a hawkish note on inflation.  Dow Chemical announced a second big price hike in less than a month.  Some product prices will increase by as much as 25% in July.  The move affects dozens of industries.  They are also adding a freight surcharge in North America.

S&P/Case-Shiller reported April home prices experienced record declines.  Existing-home sales fell in May; new home sales rose.