Daily Futures Commentary May 5, 2009

Tuesday, May 5, 2009

Equity markets received a shot in the arm yesterday when it was reported that U.S. Pending Home Resales and Construction Spending increased more than expected. These reports delivered important news because many investors believe that housing and construction are two of the best signs that the economy is beginning its recovery.

There is a camp of investors who believe that since the housing market topped well before the economy peaked in 2007 that it is going to be the sector which leads the economy out of the recession. An increase in construction spending is one of the best signs that the credit markets are loosening. For months construction projects had to be halted or scrapped while workers were laid off because project managers could not obtain loans to develop them. Now that credit spreads have returned to near normal levels, look for construction spending to continue to increase as this industry gets back on track.

 Treasury markets are trading in a tight and narrow range overnight. More asset buyback activity by the Fed is helping to ease the economy toward higher interest rates. At a time when the Treasury Department is issuing more debt, …
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