1. Fed's Inflation Fears

The minutes from the Federal Open Market Committee's May 10 meeting show a lot of debate over the state of the economy with members arguing for a pause to advocating a 50 basis point hike.

The members, reveal the minutes, saw both rising inflation and a slowing economy as a threat, and were unsure of how to act. The FOMC ultimately agreed on a quarter-point rate hike to 5 percent.

According to the minutes, Fed officials remarked that core inflation was rising slightly above the comfort range of 1 to 2 percent. The FOMC members also discussed the falling dollar and surging energy and commodity prices as catalysts for inflation.

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As for slowing growth, members pointed to the wobbling housing market and moderate consumer spending toward the end of the first quarter and the beginning of the second.

"Given the risks to growth and inflation, Committee members were uncertain about how much, if any, further tightening would be needed after today's action," read the minutes.

One thing's certain, though, new Fed chairman Ben Bernanke isn't scoring any points with the market on his pledge for greater transparency.

According to USA Today, economists said the minutes were more hawkish in tone than they expected, "especially after Fed Chairman Ben Bernanke in late April suggested the central bank might have to pause its rate campaign at some point to get a better reading on economic conditions."

"I don't know how you go from mentioning a pause and now a couple weeks later mention a (half-percentage point) move and not expect the market to be confused," says Rich Yamarone of Argus Research to the paper.

Bernanke, though, seems to recognize his missteps. He appointed a panel to examine better ways to communicate policy. The panel will be led by Fed governor Donald Kohn, who was recently appointed vice chairman of the Federal Reserve's board of governors.

Editor's Note:

• Inflation is even higher than the government reports. To read more about the government's manipulation of inflation data, check out our report, "The Inflation Lie." Go here now.

2. OPEC Keeps Pumps At Full Speed

The members of the Organization of the Petroleum Exporting Countries (OPEC) are meeting today to discuss its oil quotas. Members of OPEC have said that they intend to leave quotas where they are, despite Venezuela's calls for cutting output.

Qatari Oil Minister Abdullah al Attiyah said, "At this price it is not possible for OPEC to propose a cut." He echoed the sentiments of other OPEC members.

OPEC is concerned that record-high oil prices could cripple global economic growth and spur alternative energy investment. That would reduce oil demand from importing countries, and send the price of oil tumbling. The same thing happened in the early 1980s.

Besides, says OPEC, the oil cartel has little control over crude prices right now. It blames a lack of refinery capacity, U.S./Iran tension over Iran's nuclear program, supply disruptions in Iraq and Nigeria, and investor demand for commodities.

The majority of the members of OPEC, including Saudi Arabia, would like to see oil stabilize at $50 to $60 a barrel. That way, demand and profits would stay elevated.

Venezuela, a member of OPEC, wants the cartel to cut its output. President Hugo Chavez argues that a cut is justified because oil supply is outpacing its use. If OPEC continues to pump at full capacity, says Chavez, the price of oil will eventually collapse.

Venezuela's energy minister Rafael Ramirez threw in another twist – the country is considering pricing some of its oil sales in euros instead of dollars.

"We have been evaluating some transactions in euros and others in dollars. We must defend from the devaluation of the dollar," he commented on Caracas local television.

Editor's Note:

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3. More Signs of Real Estate Cooling

There is more evidence that home prices are seriously cooling off.

According to the Office of Federal Housing Enterprise Oversight, its home-price index displayed the slowest quarterly price gain since Q1 2004, even though the index "was up 12.5% in the past year and 2% from the fourth quarter to the first quarter," according to MarketWatch.

The report showed that from Q4 2005 to Q1 2006, home prices only rose 2.03% - the lowest level since 2004.

"These data show average housing prices still growing stronger than some might have expected," James Lockhart, OFHEO's acting director, told Reuters. "They do indicate, however, that price growth is moderating in some parts of the country, particularly in areas where prices have been rising the most."

This year, Iowa and South Dakota, for instance, experienced first-quarter price declines compared to the fourth-quarter, according to the report.

Most consider the OFHEO home-price index to be the clearest and most precise housing market gauge, as "it tracks sales and refinancings of the same property over time, meaning changes in the mix of homes being sold do not skew the reading," says MarketWatch.

"Other home-price indicators also show a marked slowdown. The median price of a new home is up 0.9% in the past year. The median price of an existing home is up 4.2%."

Editor's Note:

• Sir John Templeton was right. A housing bust is imminent. Templeton first warned housing prices could crash 50%. Find out what he said and learn how to protect yourself and even profit from the coming storm. Go here now.

4. Retailers Post Great Results

After Wal-Mart posted ho-hum results yesterday, the markets were encouraged by strong results by other retailers today.

J.C. Penney thrilled by beating expectations with an 11 percent sales increase. In addition, the company raised its second-quarter profit forecast, says Bloomberg.

Federated Department Stores, Limited Brands, Ann Taylor Stores, and Nordstrom also beat expectations.

"It's surprising that some of these numbers came in so much higher than expected," said Mike Niemira, chief economist for the International Council of Shopping Centers to Bloomberg. "The consumer is continuing to spend, in department stores and places that are a little more upscale. Higher gas prices are more of a drag on the lower income consumer."

The International Council of Shopping Centers reported that retail sales rose 4.2 percent in May. The Goldman Sachs same-store sales index rose 3.9 percent.

Analysts attributed the strong sales to Mother's Day gift buying. In addition, warmer weather helped sales.

Editor's Note:

• Discover the five most powerful wealth-building trends and the life-changing effect they could have on your portfolio in the year ahead. Go here now.

Editor's Notes:

• Inflation is even higher than the government reports. To read more about the government's manipulation of inflation data, check out our report, "The Inflation Lie." Go here now.
• Wilkinson's Hedge Fund Investing just closed out a gain on its crude oil recommendation. Don't let trades like this slip away. Get your first trade now.
• Sir John Templeton was right. A housing bust is imminent. Templeton first warned housing prices could crash 50%. Find out what he said and learn how to protect yourself and even profit from the coming storm. Go here now.
• Discover the five most powerful wealth-building trends and the life-changing effect they could have on your portfolio in the year ahead. Go here now.
• The newest scientific and medical research now points to a link between infections and diseases you've never associated with them. Protect your health now.