Bill Losey’s Weekly Economic Update for July 25, 2011

CRUNCH TIME ON CAPITOL HILL
After the defeat of the “Cut, Cap and Balance” bill in the Senate Friday, President Obama and House Speaker John Boehner (R-OH) were left to work on a deficit reduction plan with a projected $3 trillion cut in federal spending. Discussions stalled Friday, and Congress was not in session over the weekend. While Obama seeks tax increases as part of any accord, Congressional sources told Reuters that they may be tossed out of the deal. Any new bill will likely have to pass this week in the House in order to exit the Senate before the Treasury Department’s August 2 deadline. Overseas, the European Union approved a $157 billion bailout package for Greece that could also bring significant debt relief to Portugal and Ireland.

LESS HOMEBUYING, MORE HOMEBUILDING
Existing home sales declined by 0.8% in June, according to the National Association of Realtors. They were down 8.8% from a year ago, when the federal homebuyer tax credit was poised to expire. In better news, U.S. housing starts were up 14.6% for June and up 16.7% year-over-year.

GOLD TOPS $1,600, OIL SETTLES NEAR $100
Gold gained $11.50 last week and settled at $1,601.30 per ounce Friday. Oil futures ended the week at $99.87 on the NYMEX, logging a 2.33% weekly advance.

STOCKS ADVANCE 2.2% IN 5 DAYS
Progress in European debt talks and solid earnings sent U.S. benchmarks higher last week. Across July 18-22, the S&P 500 gained 2.19%, the NASDAQ 2.47% and the DJIA 1.61%. Friday, the major indices finished as follows: DJIA, 12,681.16; S&P 500, 1,345.01; NASDAQ, 2,858.83. Something notable occurred at One Liberty Plaza: the NASDAQ-100 hit its highest level since February 2001 on Friday.