Stocks suffer mild declines on mixed economic data on inflation and economic growth. Industrial production in February was stronger than expected, easing some worries about the manufacturing sector. However, the consumer price index [CPI] was also a bit stronger than estimates while consumer sentiment fell to its lowest level since September. One reason stocks aren't falling more than they have Friday is the fact worries about the sub-prime lending sector have eased some. Overall, it has been a volatile week, which isn't a surprise given that today is quadruple witching.
After Thursday's PPI release showed a sharp rise in producer prices, there were concerns that the CPI data would also disappoint. However, the data was as bad as many thought it would be with the headline figure up 0.4 percent and the core rate up 0.2 percent. The headline figure was a tenth higher than expectations, though the core rate was in line with estimates. Overall, the CPI is up 2.4 percent this past year with the core CPI up 2.7 percent. Both of these are above the Fed's comfort level, but most analysts believe a slowing in the economy will bring prices down as the year progresses.
Most data this week has pointed to a slowing in the manufacturing sector, but industrial production in February was stronger than expected. This report showed that production rose 1.0 percent, well above estimates for a gain of 0.3 percent. Capacity utilization rose to 82.0, but remains below what the Fed considers a problem.
Sub-prime lender Accredited Home Lending (LEND) continued to see a recovery Friday with the stock up nearly 27 percent. The stock had lost about three-fourths of its value the past few weeks. The company stated today that is has sold nearly all its $2.7 billion in loans at a substantial discount to cover margin calls. Fremont General (FMT) is also seeing sharp gains today, up 18 percent. The company announced that Credit Suisse (CS) had raised its line of credit to $1 billion.
Shares of Wal-Mart (WMT) are up half a percent after the retailing giant announced it would not launch an industrial loan company. On Thursday, news hit the wires that WMT was looking at entering the financial services industry. It seems traders are pleased that the company has decided to stick with what it knows best.
Overall, unless a rebound occurs late in the session, the major market indices will lose ground on the week. Nonetheless, the bulls have to be pleased that some disappointing economic data and continued worries about the sub-prime lending sector haven't created more selling.
Senior Staff Writer & Options Strategist
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