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March 10, 2005

The Good, the Bad and the Ugly

Amey Stone

Every Thursday morning, just before my weekly five-minute interview on syndicated radio show Business Talk This Morning, I prepare a short crib sheet for myself. I write "Good" and "Bad" at the top of a blank sheet of paper, then I as I review the major business and economic news of the week, I list the most significant items under the appropriate heading.

Today was the first day in about a year of performing this exercise that I left the "Good" column totally blank.

Under the "Bad" column went the sharp spike in the price of oil (gasoline now averages $2 a gallon nationally according to AAA and will no doubt go higher), a sudden spike in long-term bonds to 4.5%, a surprising jump in first-time jobless claims (to 327,000) and a shocking surge in consumer credit to $11.5 billion in January when expectations were for $5.4 billion.

What could go in the good column? Before today's jobless claims report, I would have cited a stronger labor market. Now I'm not so sure. Last week I was encouraged that inflation was so subdued. Now that commodities prices are rising so quickly, that doesn't seem such a safe bet.

As I said in the radio interview, I'm actually surprised how well the market has held up given the twin spikes in oil and interest rates. Why so much stability? Probably because both those worries are caused to some extent by a faster-growing economy, which means corporate earnings should rise. Intel's update tonight will give us an early glimpse into how first-quarter earnings are shaping up and may be significant for the broad market. Intel management is always very cautious on these calls. But if they are especially downbeat, tomorrow could be a rough day.

01:36 PM

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