Weekly Economic Update for May 16, 2011

Presented by Mark Lund, The Investor Coach.

WEEKLY QUOTE
“There are no gains without pains.”
– Ben Franklin

INFLATION SPRINGS AHEAD
Consumer inflation increased by 0.4% in April after rising 0.5% in March. (You can cite food and energy costs – gasoline prices rose 3.3% alone last month.) Annualized inflation is the real story here: the federal government’s Consumer Price Index has advanced 3.2% in the past 12 months. That is the biggest annual gain since October 2008. As for wholesale inflation, the Producer Price Index was up 0.8% for April; it showed an annual increase of 6.8% (the most since September 2008).^1,2,3

GAINS IN RETAIL SALES, Consumer SENTIMENT
The Census Bureau announced that retail sales were up 0.5% in April; it also revised the March gain from 0.4% to 0.9%. The University of Michigan’s preliminary April consumer sentiment survey came in at 72.4, better than the 70.0 forecast by economists polled by Reuters and the final April reading of 69.8.^1,4

KEY Commodities BOUNCE BACK
Last week, there was a bit of a rebound in precious metals and energy futures. Gold actually advanced 0.15% for the week; silver’s five-day loss was 0.77%. Oil futures gained 2.5% for the week on the NYMEX, while RBOB gasoline futures lost 0.6%.^5,6

BLEAKER OUTLOOK FOR MEDICARE, SOCIAL SECURITY
New reports from trustees of the entitlement systems project that Medicare’s trust fund will be depleted by 2024 and that Social Security’s trust fund will be exhausted by 2036 … if no action is taken. (Prior respective estimates were 2029 and 2037.) By these forecasts, Medicare would only be able to pay out 90% of retiree hospital insurance costs after 2024; after 2036, Social Security would only be able to pay out about 77% of scheduled benefits.⁷

A FAIRLY FLAT WEEK
While the NASDAQ pulled off a tiny weekly advance (+0.03% to 2,828.47), the Dow and S&P 500 ended up with some minor weekly losses (DJIA, -0.34% to 12,595.67; S&P 500, -0.18% to 1,337.78.)¹

THIS WEEK: No major economic releases come out Monday, but Federal Reserve Chairman Ben Bernanke speaks at Georgetown University. Tuesday offers reports on April housing starts and industrial output plus 1Q results from Wal-Mart, Dell and Home Depot. Wednesday, the most recent FOMC minutes are released and we have earnings from Target and HP. Thursday brings weekly jobless claims figures, data on April existing home sales, the Conference Board’s April LEI index and 1Q results from Sears, Gap and GameStop. No economic releases are scheduled for Friday.

Sources: cnbc.com, bigcharts.com, treasury.gov, treasurydirect.gov – 5/13/11^1,8,9,10 Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.

Citations.
1 – cnbc.com/id/43026751 [5/13/11]   
2 – nytimes.com/aponline/2011/05/13/business/AP-US-Consumer-Prices.html [5/13/11]
3 – bloomberg.com/news/2011-05-12/u-s-april-producer-price-index-report-text-.html [5/12/11]
4 – census.gov/retail/marts/www/marts_current.pdf [5/12/11]
5 – blogs.wsj.com/marketbeat/2011/05/13/silver-gold-have-a-divergent-week/ [5/13/11]
6 – marketwatch.com/story/oil-futures-ease-but-stay-above-98-a-barrel-2011-05-12 [5/13/11]
7 – money.usnews.com/money/blogs/planning-to-retire/2011/05/13/financial-outlook-worsens-for-social-security-medicare [5/13/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F13%2F10&x=0&y=0 [5/13/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F13%2F10&x=10&y=18 [5/13/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F13%2F10&x=0&y=0 [5/13/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F12%2F06&x=0&y=0 [5/13/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F12%2F06&x=0&y=0 [5/13/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F12%2F06&x=0&y=0 [5/13/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F14%2F01&x=0&y=0 [5/13/11]
8 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F14%2F01&x=0&y=0 [5/13/11]8 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F14%2F01&x=0&y=0 [5/13/11]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [5/13/11]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [5/13/11]
10 – treasurydirect.gov/instit/annceresult/press/preanre/2001/ofm11001.pdf [1/10/01]

This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by MarketingLibrary.Net Inc., for Stonecreek Wealth Advisors, Inc., a fee only registered investment advisor in Salt Lake City, Utah. Mark Lund is the author of The Effective Investor.