The Federal Reserve said in its Beige Book survey, released Wednesday, that the housing sector is still "quite depressed" and unlikely to emerge from its slump until late 2008 at the earliest. "The national economy continued to expand during the survey period of October through mid-November but at a reduced pace," the report said. "Demand for residential real estate remained quite depressed, with only a few tentative and scattered signs of stabilization amidst the ongoing slowdown." Seven out of 12 districts posted slower economic activity, with the remaining five seeing "modest expansion or mixed conditions." Labor markets were "relatively tight overall but loosened in some areas," while wage pressures stayed unchanged. Price pressure on goods and services "remained modest," excluding food and energy. Prices on energy and agricultural products saw "significant" increases. Most retailers surveyed expect sales "to be modest at best in the upcoming holiday season." Also Wednesday, Fed Vice Chairman Donald Kohn made comments about the Fed's concern about reduced credit availability for businesses and individuals that were interpreted to suggest the Fed might lower interest rates at its December 11 meeting (full story). That speculation set the DJIA on a 335-point tear and contributed to a 2.6% advance on the S&P 500.
Commentary: Markets Soar After Fed Comments Rekindle Rate-Cut Hopes • Can This 'Kohn Rally' Continue? • U.S. Growth Slows Since August: Beige Book
Stocks to watch: DIA, SPY, QQQQ