Monday, April 7, 2008

today's market action, plus growing consumer credit

for those that believe in such things, the market was once again able to remain above support levels and hold on to last week’s gains, but it’s hard not to notice the fact that many of the stocks that have had a very nice run over the past several days reversed course after a very hot open. monday morning gaps are just not to be trusted - ever.

this market still looks okay. technicians are bemoaning the lack of volume, however. it looks like the ball remains in the bulls’ court. the market’s mood seems to have shifted, which could provide some underlying support. investors have had plenty of opportunities to move more aggressively to the sidelines and that hasn’t happened yet.

moving on to consumer credit, it expanded by $5.2 billion in february following an increase of $10.29 billion in january, which was slightly less than expected. increases over the past five years have averaged $9.1 billion. the increase for the latest month was led by a $4.7 billion increase in the amount of revolving credit outstanding, now at $952 billion.

nonrevolving credit increased $0.5 billion to $1.588 trillion, a category that has increased only $10 billion since the third quarter of 2007, reflecting weak growth in credit for new automobiles.

compared to the past five years, the growth of consumer credit has actually been strong in recent months, increasing at an average rate of $11.3 billion since last summer and at $11.1 billion per month over the past year. this should be seen as good news given the concerns that exist over the availability of credit.

the current situation is a lot better than in the days of the savings and loan crisis in the early 1990s when consumer credit contracted in more than 15 calendar months (mostly in 1991).

somewhat interesting is that the average rate paid on credit cards was 12.48% in february, a decrease of 1.1 percentage points from the third quarter of last year.

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