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Housing starts jump 11.6%

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New home construction jumped 11.6% in May to a seasonally adjusted annual rate of 1.73 million, which was well ahead of economist's forecasts for 1.60 million. It was the biggest percentage increase in housing starts in nearly seven years. April's housing starts were revised fractionally lower to 1.553 million from 1.555 million.

Starts of single-family homes rose about 10% to an annual rate of 1.39 million.

Building permits, which anticipates future construction rose 2.6% to an annual rate of 1.67 million.

The report shows the housing boom still has some legs. Lower mortgage rates, growing incomes and robust home equity appreciation have lured buyers into the market despite weakness elsewhere in the economy.

So far in 2002, 681,600 homes have been started, about 4% more than the 653,000 begun in the first 5 months of 2001. Building permits are running about 2% stronger that last year's pace.

In May, much of the growth in new construction came from the Northeast and Midwest, where construction rose by more than 20%. Smaller gains were reported in the South and West.

Consumer prices remain tame

The Labor Department reported that the consumer price index for May was unchanged, which was in line with economists forecast. Excluding the volatile energy and food components, the core rate edged up 0.2%, which was also in line with forecasts.

Since last May, consumer prices have risen 1.2%. Energy, meanwhile, plunged 12.3%, led by a 22.5% decrease in the cost of natural gas, a 17.5% falloff in gasoline prices, and a 14.3% decline in fuel oil. Over the past 12 months, the price of food has climbed 1.9%, mostly due to rises in the cost of fresh vegetables (+5.5%) and poultry (+2.9%).

June Gold Futures (gc02m) rose $0.60/oz to $318.00 (+0.18%) after the release of this morning's economic data.

Stock futures sink lower

Traders are looking at a lower open for stocks this morning as S&P futures (sp02u) trade down 3.6 points at 1,033. NASDAQ futures (nd02u) are down 10 points at 1,144 and Dow futures (dj02u) are down 35 points at 9,635.

Fair value for the S&P 500 today is $1.88. That price will not change during the day. HL Camp & Company has their computers set for program buying at $3.08 and set for selling at $-0.20. Fair value for the NASDAQ-100 today is $6.65.

If you would like more information on fair value, how it is calculated and uses, please visit www.programtrading.com.

Jeff Bailey
Senior Market Technician
Option Investor

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