Although the housing sector seems to have picked up due to the decline in prices, the U.S. economic activity actually plunged to its lowest level in five years in February after a report by the Chicago Federal Reserve Bank indicated an increasing likelihood that recession has begun.

The Index fell to -1.04 in February from -0.68 in January illustrating further deterioration. Since the one month figure can be inaccurate at times, the Feds see the three-month moving average as a more accurate indicator to the national economic growth. But in this case it won't really matter since the readings for both averages were the lowest since April 2003!!

It's not quite clear on how the economy is doing at the moment. Concerns about inflation had eased after the three-month average showed low inflationary pressures in the coming year but then again if we take what the Feds say into consideration then there's a clash somewhere and the missing link has yet to be found! Who are we supposed to listen to ladies and gentlemen? The Feds saying uncertainty about the inflation outlook has increased of the moderating inflationary pressures?

The black sheep in the herd has always been the housing sector after it had recorded poor sales and construction readings. The cancerous cell in the body of the economy was the one that actually eased all kinds of pressure and tension in the area as it surprisingly reported a rise in sales by 5.03 million in February on the back of record low prices compared to the previous rise of 4.89 million in January.

This rise marked the first in seven months showing an incline in sales by 2.9% after prices have been plunging the past year. Compared with a year ago sales have declined 23.8% but the boost seen last month which could be a sign of stability was due to the massive drop in prices.

Median prices fell to $195,900, dropping 8.2% from a year earlier. However, prices of single-family homes fell 8.7% marking the largest drop since the records began in 1968. This finally pushed inventories to diminish as inventories of unsold homes fell 3% to 4.03 million.

Region-wise, sales inclined in three of four regions. The West is still at the bottom as it fell 1.1%. However, the remainder was impressive especially in the Northeast where sales rose 11.3%, 2.5% in the Midwest and 2.1% in the South. Median sales price also were lagging in the West as they were down 13.4% due to the inactive jumbo loans market with loans above $417,000 are frozen.

Sales of single-family homes inclined 2.8% in February; the second consecutive increase, causing a fall of 5.5% in the inventories of unsold single-family homes. Sales of condos rose 3.7% in February after they have been slacking off with a rate of 29.7% the past year.

It’s a good start this week for the U.S. after the upbeat data about the housing sector combined with JPMorgan quadrupling its offer to Bear Stearns helped push U.S. Stocks. After being at $2 a share, JPMorgan Chase agreed to buy Bear Stearns for $10 a share in an attempt to reduce risk in financial markets. At the start of the session, the S&P 500 Index increased 20.28 points or 1.5% to 1.349.79. The Dow Jones also rose 187.48 or 1.5% as well to 12.548.8 while the Nasdaq Composite Index gained 50.36 or 2.2 percent to 2,308.47.

I guess there's no time to rest dear reader, even after the long holiday! Minds now are still puzzled after the contradictory data being released from the U.S. economy yet traders' risk appetite increased as confidence is somewhat restored. It seems like a good week for the U.S. as the greenback gained instantly at the hour of the report but yet it was not strong enough to maintain those levels. The Term Auction Facility is just around the corner and the Feds are not getting a shut eye! They're exerting all the effort they have to salvage the economy and leap over the pit hole as they hang closely by the edge…