A snapshot of the U.S. economy in April and May released today by the Federal Reserve showed that "conditions remained weak or deteriorated further" across the country, with manufacturing, services and travel among the sectors displaying few signs of recovery.
But the Fed's Beige Book, as the survey is known, may have offered just enough optimism about an eventual recovery. The markets reversed a day-long dive around 2 p.m., just as it was being released.
Even so, the overall theme of the report was gloomy. Manufacturers reported that their outlook improved, but job markets in most of the Fed's 12 districts remained weak and demand for energy remained slack. Some areas saw home sales increase a bit, while new construction stabilized "at very low levels."
Eight districts -- New York, Philadelphia, Cleveland, Richmond, Chicago, Kansas City, Dallas and San Francisco -- saw more residential real estate transactions, The Wall Street Journal reported.
"Contacts from several Districts said that their expectations have improved, though they do not see a substantial increase in economic activity through the end of the year," the survey found.
Despite the glimmers of stabilization in some areas, the Fed's assessment of the commercial real estate market was dismal. "Vacancy rates for commercial properties were rising in many parts of the country, while developers are finding financing for new commercial projects increasingly difficult to obtain," it reported.
That could be a big problem for banks. Many people who watch the financial industry closely have long said that losses on commercial mortgages and investments linked to them would likely be a painful next stage of the crisis roiling Wall Street.
Fed Beige Book: Economy stabilizing, but 'at very low levels'