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Economy
Fourth quarter GDP numbers fell less than anticipated, but the 6.3% decline at an annual pace for the quarter was still the largest quarterly drop in 26 years. Spending by consumers fell 4.2% during the quarter, spurred by a 22% decline in large-ticket items. The surveyed economists forecast a 5% decline during the first quarter of 2009, followed by a 1.7% drop during the second quarter of the year.
The housing market continued to be depressed during the month, but there were some positive signs. After falling to an all-time low in January, new home sales rose 4.7% during February, the first increase since July. Sales are now at an annual pace of 337,000, down more than 41% from a year earlier. Housing startsand building permits also rose during February, up a surprising 22% and 3%, respectively. Even with the rise, however, housing starts are still down 47% y/y. Sales of existing home also rose during the month, up 5.1%, which was much higher than the anticipated 0.9% decline.
Jobless claims continued to be at historically high levels as 652,000 claims were filed during the last week of March. While initial claims have fallen since the beginning of the month, thenumber of people continuing to claim unemployment for more than a week sits at a record high of 5.56 million. The number is expected to keep going up as businesses cut costs to survive.
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Equity Markets
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Stocks ended the month in positive territory across all major indexes.
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Growth beat value across all market caps.
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Domestically, Russell Midcap was the leader.
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The best-performing sectors were Financials (17.9%), Materials (15.3%) and Consumer Discretionary (12.3%).
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The worst-performing sectors were Utilities (2.5%), Energy (3.8%) and Consumer Staples (4.1%).
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Emerging markets returned 14.4% for the month the highest return by over 5%, but is still down the most over the last year.
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All major indexes excluding Emerging Markets are down 3 Month, YTD and 1 Year time periods.
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Fixed Income Markets
Credit spreads during the month remained at wide levels even as the equity market has rallied. Generally, as the market ralliesspreads will tighten.
Mortgage rates and spreads have come down recently in reaction to the Fed’s purchase of MBS securities. Mortgage refi’shave been rising in response to the declines.
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