These same factors disheartened fixed income market participants as yields on Treasury securities of maturities two years and longer rose. Growth stocks outperformed value stocks over all capitalization sizes. Rapidly shrinking inventories bode well for economic growth in the second half of 2001. Our outlook is for another federal funds rate cut at the FOMC's May 15th meeting. The cumulative effects of monetary stimulus will accelerate economic growth in the third and fourth quarters.
Equity securities are likely to respond positively.
Domestic equity markets advanced in April in response to another Federal Reserve interest rate cut and first indications of a bottoming in several business condition metrics. Growth stocks significantly out-performed value stocks in April. Inventories, however, shrank in absolute terms and compromised growth by approximately two and one half percentage points. Excess stocks are being rapidly absorbed. Unemployment claims were at levels not seen since the last recession and are a factor to monitor, but housing activity demonstrated record vigor.