Stocks are lower as an unexpected drop in home construction raised concerns about the pace of the economy’s recovery

The Commerce Department said construction of homes and apartments fell 10.6 percent in October to an annual rate of 529,000, well below the pace of 600,000 that economists polled by Thomson Reuters had predicted.

Building permits, a key indication for future activity, slid 4 percent to an annual rate of 552,000, also below the rate of 580,000 that analysts had forecast.

There was little reaction to a report that found inflation at the retail level remained tame as rising unemployment, nervous consumers and tight credit keep prices stable.

The Labor Department said consumer prices rose 0.3 percent in October, slightly above the 0.2 percent economists expected. Core inflation, which excludes volatile energy and food prices, rose 0.2 percent, compared to expectations of a 0.1 percent rise.

A report released Tuesday on prices at the wholesale

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U.S. stocks surged to their 13-month highs Monday as a weaker dollar and a rebound in U.S. retail sales reinforced hopes that an economic recovery is indeed underway.  Stocks also got a boost after Fed chairman Ben Bernanke reiterated Fed’s intention to keep interest rates low for an extended period. 

Gold advanced 2% to fresh record highs; and the price of silver jumped 5.9%.  The initial gains in the equity prices followed strength in Asian markets yesterday.  Strength in Asia was partly helped by reports that said Japanese economy grew at its fastest pace in over two years, up 1.2% during the third quarter.  To add to the bullish mood in the region, leaders of the Asia Pacific Economic Cooperation promised to keep the stimulus measures in place.

On Monday, the 30-stock Dow Jones industrial average rose 136.49 points, or 1.33%, to 10,406.96. The broad Standard & Poor's 500-stock

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Jennifer Hughes (Financial Times): Visibility improved but storms may lie ahead, November 13, 2008. The fog is beginning to lift. All year executives, analysts and investors have talked of a “lack of visibility” on the outlook for the economy, earnings and financial markets. By “visibility” they are in essence complaining about the uncertainty that clouds all forecasts all the time, but which we had increasingly managed to ignore during such a steady run of good times. Investors are becoming more confident that the fog is lifting, but that does not necessarily mean there is sunshine waiting just behind it.

• Doug Kass (TheStreet.com): Market ignorance is bliss, November 12, 2009. I do believe with some certainty that the market’s vulnerability

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Baltimore (TFN): I cannot say with total certainty that duct tape has ever saved my life. But I can say it has saved the day on more than one occasion, like the time I fell feet first into a frigid river, roaring with the power of Alaska’s springtime snowmelt.

In the woods, you have to dry off fast or risk any number of calamities. Living in temperate rainforest, an emergency fire was a challenge. But thanks to duct tape’s inherent desire to burn, I was re-warmed in no time.

But my mundane story has got nothing on the bush pilot that returned to his Piper Cub (the plane, not one of Palin’s kids) to find a pissed off grizzly had utterly destroyed the craft’s ability to fly as the hungry beast searched for the scraps of meat hidden inside.

Just like any savvy outdoorsmen, the pilot’s first thought after seeing

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The Federal Reserve decided to keep the Federal Funds rate unchanged at the meeting it concluded today, as expected. Below is the current Fed Statement along with the one from their September meeting in paragraph-by-paragraph format, with my translation and commentary interspersed. As the graph below shows, the market is expecting the Fed to remain on hold, with Fed Funds between 0 and 25 basis points for an extended period. The graph shows the expected outcomes for the January meeting (before today’s announcement) from the Cleveland Fed. The market set the odds of anything other than standing pat at either today’s meeting or the December meeting effectively at zero. Reading off the chart, it looks like about a 95% probability of no action in January as well. I doubt we will see the Fed raise rates before the third quarter of 2010. The Fed is ...

There were some other very interesting presentations at the conference hosted by the Federal Reserve Bank of Boston last week. Fed Chair Ben Bernanke spoke on Financial Regulation and Supervision after the Crisis while Princeton Professor Alan Blinder's message was

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This post is a guest contribution by Dian Chu*, market analyst, trader and author of the Economic Forecasts and Opinions blog.

The dollar’s value against major currencies has fallen in recent months as the US fiscal outlook worsened and amid expectations that interest rates will remain close to zero for some time to fight the economic downturn.

This week, the euro broke above the psychologically important level of $1.50 driving gold prices to record levels, prompting many global central banks intervening on currency markets to slow the dollar’s fall (Fig 1).

How did we get here?

Since the financial crisis last fall, currency markets have taken their cues mostly from stock markets. When stocks plunged in March of this year, investors rushed to the safety of US government bonds, pushing the

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Meryn King, the British counterpart to U.S. Fed Chair Ben Bernanke, had this to say in a speech yesterday: “The United Kingdom faces two fundamental long-run challenges. First, to rebalance the economy, with more resources allocated to business investment and net exports and fewer to consumption. "That is consistent with the need – now widely accepted – to eliminate the large structural fiscal deficit and to raise the national saving rate. It is part of a need for a wider rebalancing of domestic demand in the world economy away from those countries that borrowed and ran current account deficits towards those that lent and ran surpluses." Everything he has to say about the UK is true in spades for the US. The US. is more dependent on consumption than is the UK and perpetually runs trade (current account) deficits. We need for the US to ...

David Einhorn, highly respected hedge fund manager of Greenlight Capital and author of “Fooling some of the people all of the time” yesterday delivered the keynote address at the Value Investing Congress. His full speech can be accessed here, but Rolfe Winkler of Reuters has very handily published the highlights, as posted below.

On Bernanke and Geithner: Presently, Ben Bernanke and Tim Geithner have become the quintessential short-term decision makers. They explicitly “do whatever it takes” to “solve one problem at a time” and deal with the unintended consequences later. It is too soon for history to evaluate their work, because there hasn’t been time for the unintended consequences of the “do whatever it takes” decision-making to materialize.

On too big to fail and the true lesson of Lehman: The proper way to deal with too-big-to-fail, or too inter-connected to fail, is to make sure

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For Immediate Release

Chicago, IL – October 19, 2009 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Eastman Chemical (EMN), E.I. DuPont (DD), T. Rowe Price (TROW), Western Digital (WDC) and SuperValu (SVU). To see more earnings analysis, visit http://at.zacks.com/?id=3207.

Every day, Zacks.com makes 4 stock picks available, free of charge. To see them, go to http://at.zacks.com/?id=5612.

This Week's Events

Third-quarter earnings season hits full stride this week with 439 companies confirmed to report. More than of a quarter of these are from the S&P 500 (135 companies).

Housing data will be the highlight on the economic calendar. The existing home sales data will be influenced by the first-time home buyers' credit. The starts and permits data could be more interesting, especially if they show fear on the part of builders about the subsidy

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