Following the Federal short term rate cut to banks on overnight borrowing, the stock market rallied with a 343 point gain for the Dow Jones, which polevaulted over the 11,000 mark. The tech-heavy NASDAQ composite gained over 80 points. Are happy days here again? They are, if energy prices don't bring the whole rally to a halt.

The Fed tries to control short term interest rates in order to limit inflation, but the financial body may soon be out of wiggle room. Bank rates have to stay ahead of inflation rates, which even in a healthy market is clocked at about 3 percent. With short term rates down to 4 percent, pundits say it is unlikely the Fed will make further cuts.

That means the economy is on its own while the nation waits out the effects of five consecutive rate cuts in as many months. Continuing economic indicators include jobless claims and the housing market which are showing signs of improvement.

The Labor Department has reported that initial jobless claims fell 8,000 to 380,000 in the week ending May 12 from a revised 388,000 in the prior week, the lowest number of claims since March 24 when claims measured 365,000.

While some experts predicted jobless claims would be higher, there are 718,000 more jobless claims than for the same period a year ago.

April housing starts are higher than expected, a 1.5 percent increase to 1.609 million. Economists had expected 1.60 million. NAR spokesperson Steve Cook says current NAR research shows that existing home sales may again approach 1999 record levels of 5.15 million homes sold. Chief economist for the NAR, David Lereah says, "This year’s lower level of mortgage rates is stimulating the economy through strong home sales, as well as high levels of refinancing."

While stock market investors celebrate gains with profit-taking, should they brace for more bad news on the way?

Despite positive announcements, one economic indicator isn't looking so positive - fuel costs.

The Pacific Northwest is plagued by rolling blackouts, with some California electricity services going bankrupt after purchasing electricity at high prices than they were allowed to pass on to consumers. The national average price for gasoline has risen to $1.74 per gallon from $1.44 per gallon in March, a 26 percent increase, according to the U.S. Department of Energy.

President Bush calls the energy shortage the most serious "since the oil embargoes of the 1970s," and unveiled a long-term plan based on a task force report led by Vice President Dick Cheney. ``A fundamental imbalance between supply and demand defines our nation's energy crisis,'' said the report.

Bush's controversial plan calls for increasing the nation's supply of energy by easing regulatory barriers in building new nuclear plants, expanding oil and gas drilling on public land in the Arctic National Wildlife Refuge in Alaska, and recycling plutonium into new nuclear power, among other measures.

One of Bush's proposals is to take private land for power lines, and that idea is expected to meet vigorous objections from property rights advocates.

While Cheney's report states that the energy crisis was years in the making and will take years to undo, critics say Bush's plan does nothing for short-term problems such as California's rolling blackouts and rising gas prices at the pump.

And that could be the live wire that shorts out the economic rally.

Published: May 18, 2001

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.