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By Michael Sean Comerford | Daily Herald Staff
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Published: 1/20/2008 12:37 AM

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Market Watch

Diane Swonk is chief economist and senior managing partner, Mesirow Financial, Chicago

What moved markets last week?

"Gosh. What didn't move markets. It was an amazing week. Good news. Bad news. It just didn't matter, they all just moved markets down. What we saw was some bad housing numbers, some bad financial numbers. Although I think what moved markets more was not necessarily the write-offs but the fear of what might be in store and what they still may have in their bag in terms of write-offs, in terms of the home mortgage market."

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What did the indicators tell us?

"We saw home construction continue to fall. Employment was actually up a bit. The Beige Book was a mixed bag, looking at the economy a little brighter than we have seen in some of the other reports out there. But that was virtually ignored. We saw (Federal Reserve Chairman Ben) Bernanke battle it out with Congress people on the Hill."

Are we in a recession?

"I don't think that is as important a question as 'Why are so many people feeling so bad for so long, despite the fact that we posted two quarters in a row of 4 and 5 percent growth in the middle of 2007.' I think the issue is that income inequalities have reached their highest in 50 years … Throw in higher energy prices and home prices … these issues are what people feel leaves them very much behind … Whether we are a little bit above or a little bit below zero, we're talking about an economy that is skating on thin ice."

With the housing recession, how is mortgage refinancing going?

"Mortgage refinancings have begun to surged, along with mortgage resets… they are significantly better because the Fed has eased (interest rates). So a lot of people who might have been put in jeopardy are limiting the collateral damage out there … We are building the basis for a cleaner second half of the year."

What could move markets this week?

"We start the week off with a soft note because it is a three day weekend for many people out there because of the Martin Luther King holiday on Monday. But going forward we have … existing home sales. We'll truly be watching profits and the profit season. The good news is we're beginning to see the profits, now that we've gotten through the bad news on financials … GE on the upside (Friday) and IBM on the upside (Friday), that could (help) us out a little bit."