Take on the ticker
Diane Swonk is chief economist and senior managing partner, Mesirow Financial, Chicago
What moved markets last week?
"We saw a really interesting disconnect. The equity market really took all the bad economic news with a bit of a shrug. The week was remarkably resilient in the equity market … But we did see mixed economic data. Inflation is still high. We know that consumer inflation is particularly high because of food and energy … (However) credit markets continued to be in turmoil. This is something of real concern for the Federal Reserve."
In the wake of the Northwest/ Delta merger plan, are airlines a good investment?
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"The industry, as an investment, is a dicey deal. We've seen four airlines go bankrupt in recent weeks. What was interesting about the Delta/Northwest deal was you took two airlines in fairly good shape and put them together, which is unusual #8230; The airline industry is struggling with energy problems. Although they've gotten through some of their union problems, we saw American Airlines shut down by the FAA. So it is still a very dicey deal."
As for the equity markets, have they bottomed out?
"Timing is really difficult. But #8230; to see how the stock markets have done over the last several weeks, really I would argue since March 17th and the whole Bears Stearns (crisis) hitting the markets, these markets have held up under bad news and rallied on good news. We really have seen some kind of a bottoming out or firming in equity markets."
Are you optimistic?
"What we need to see is the next step, which is credit markets to follow. Without the credit market, it leaves equity markets vulnerable. But I do think we will see these markets rally by the second half of the year. But I think it will be pretty volatile until we get this credit market situation sorted out."
What could move markets this week?
"The week coming up is a little bit quieter of a week. We're going to see consumer sentiment again. The real issue is we're in the height of earnings season. This is what will give equity markets a bit of a lift but what we really need to see is, though, are credit markets settling down a bit. What is going to be interesting is, as we get closer to April 30th, #8230; what is going to happen with the Federal Reserve. Most people are thinking the Fed is close to its end, in its easing cycle."