Fed closer to boosting consumer loan access.
January 29, 2009 by admin
The Fed is running short of bullets as it lowered the Fed discount rate to close to zero late last year. They remain committed to assisting the economy and boosting consumers availabilty to credit. There has been speculation that the Fed would begin working with lenders directly aimed at the credit card and auto finance markets. The decision to allow GMAC to become a bank and the approval of TARP funds for auto companies late last year has been a positive move for auto lending. Many of the major banks that issue credit cards including Chase, Citigroup and American Express have also received funding from the tarp program.
The Fed has indicated they are likely to begin loan pools of securities that are consumer related loans or small business loans. This new movement will be dubbed the TALF program, not likely to include commercial loans. The moves are likely to increase the amount of credit cards that are offered to consumers, but not likely to offer lower rates on these types of loan programs. Numerous credit card companies have attempted to raise the rates on their card portfolios over the past few months, further challenging consumers and their budgets.
January 28, 2009
January 28, 2009 by admin
The stock market jumped on news following a report that the Fed was poised to begin purchasing toxic debt from leading banks. This move has been long anticipated as an additional necessary step to jump start the economy and provide banks with increased lending potential. The stock market took the news and extended its win streak to four straight days. Financial stocks surged and some of the nations largest companies (Bank of America, Citi, JP Morgan) have jumped over 20% in the last week as they recover from near historic low valuations.
The FOMC today announced there would not be any changes to the Fed Funds rate. Their cuts late in 2008 have left little room for future rate cuts, so they are likely to explore other alternatives to help improve the credit markets.
The yield on the ten year bond rose to 2.66% following the rise in the stock market. This is likely to have a slight impact in pushing mortgage rates higher. Fixed mortgage rates are still in the low five percent range and remain opportunistic for consumers who are looking to refinance or purchase a home in the near future.
January 27, 2009
January 27, 2009 by admin
Tuesday unveiled two key economic reports for the market to digest. Economic news has a tendancy to send the stock market on a roller coaster ride as investors today are searching for a direction in this highly volatile time. The first report released today covered existing home prices. According to a report release from CaseSchiller, existing home prices have fallen by almost 20% over the past twelve months. This can clearly be attirbuted to the challenges facing the U.S. housing market from the foreclosure crisis that is continuing to gain momentum. The second major report to be released today is the consumer confidence report. This report showed a decrease in confidence to the lowest level in the past 40 years. Consumers have little reason for optimism as employers are continuing to announce further corporate layoffs and almost all major economic news has been negative over the past sixty days.
The government is likely to focus on the economic stimulus packages they have been devising over the past sixty days. Internationally, Germany and Japan have both announced they will be moving forward with their own stimulus programs in an effort to jump start their respective economies. Locally, fixed rate mortgage loans remain relatively unchanged, despite the negative economic news. The stock market has traded in almost a 200 point range for the day, not uncommon reaction to the uncertain times.
January 26, 2009
January 26, 2009 by admin
The stock market moved up following a report that existing home sales were up over six percent for the month of December. This was one of the first positive news reports of the year and a provided a sign of confidence to the economy and housing industry. Home prices are continuing to move lower, but eliminating inventory is a good first step towards placing a bottom to the housing crisis.
Mortgage rates have moved up slightly over the past two weeks. The yield on the ten year bond is not at 2.66% and fixed mortgage rates on both fifteen and thirty year loan terms have moved up over .25% recently. Long term thirty year fixed mortgage are still offering rates in the low to mid fiver percent range and offer consumers a great avenue to refinance and lower house payment by locking into historically low rates.
The stock market is also digesting some breaking news on the merger and acquisition front. Pfizer is moving forward in a combined cash and stock acquisition of rival drug maker Wyath, while Rohm & Haas has announced that Dow Chemical will likely miss their closing date in their acquisition of the chemical maker. Both pieces of news have helped to provide some stability for the stock market and bring investors back into equity positions.
The news on the jobs front is not as positive as some of the worlds largest employers have announced plans to further reduce their workforce. Home Depot, Caterpillar and Sprint have announced they will be reducing their workforce, news that may be welcome to investors but is a large concern for the health of the U.S. economy and hopes to end the economic recession.
January 23, 2009
January 23, 2009 by admin
The stock market turned it’s attention to corporate earnings this week and the results have been damaging to investors and confidence for the market. The market has seen several days of steep sell offs following corporate earnings from some of the worlds largest companies (Microsoft, GE, Google). While the earnings for the fourth quarter of 2008 in most cases was in line with most analysts expectations, the lack of guidence and certainty moving forward into 2009 has been a challenge for almost every major company.
Lending rates are still hovering near historic low levels (fixed mortgage rates in the low 5% range) and mortgage refinancing applications have jumped up sharply in the past thirty days. The news out of the banking sector is not very positive as many top analysts believe that the nations largest banks (Citigroup & Bank of America) remain severly undercapitalized, and could need hundreds of billions of dollars in the future.
International markets have remained jittery over the past two weeks. The GDP report for Great Britain has confirmed that their economy has shrunk during the last two quarters as they face similar problems to the U.S. market and are struggling to support home values and job growth. The weekend may provide a few days of much needed cooling off for the stock markets around the world as investors have continued to pull out of equity positions at a record pace.
January 20, 2009
January 20, 2009 by admin
The inauguration of President Barack Obama is a historic day and one that was supposed to bring on hope of change for the United States. The stock market must have missed this memo as it sold off to levels last seen in November of last year. Financial stocks including Bank of America, Citigroup and JP Morgan Chase were down between 15-25%. The banking industry is has been in a free fall tailspin as mounting evidence that the U.S. economy will likely get worse in 2009.
Bank of America has gained attention as they were required to go to the government for an additional twenty billion in TARP funds following their merger with Merril Lynch and their fourth quarter financial reqults. Many analysts believe the company will require between 80 to 100 Billion dollars in the next twelve months as their capital position deteriorates further. The companies exposure to the eroding real estate market through their own lending and their purchase of Countrywide last year is likely to be an achiles heel for the bank until home values begin to stabalize.
The additional 350 billion of TARP money will be needed over the next sixty days as banks try to stall off their financial collapse and keep their capital ratios inline. The new President will certainly have many challenges in fixing the economy and it is likely to require trillions of U.S. funds via taxpayer guarantees to ensure that these banks and financial instistutions survive, a challenge that is likely to further damage the relationship between main street and wall street.
January 15, 2009
January 15, 2009 by admin
The stock market continued moving lower on Thursday as economic news is bringing more questions than answers as it relates to the health of the U.S. economy. The stock market has lost ground for six straight days and is close to retesting the 7800 level it reached in November of 2008. There were a number of reports released today that have had an adverse affect on the market.
Initial jobless claims rose by over 50,000 for the week, a sign of continued deterioration with the labor markets. Home foreclosures spiked up to 3.16 million, a record high according to a report from RealtyTrac, one of the nations largest foreclosure experts. The numbers continue to grow at a staggering level and are up over 80% from 2007, indicating that now almost 2 out of every 100 homes in the United States is facing foreclosure.
Major banks are now beginning to report their Q-4 2008 earnings as well as provide guidance for 2009. The growing consensus is that 2009 will continue to be a struggle for major financial companies as the market continues to deteriorate. J.P. Morgan, one of the worlds largest banks reported earnings above expectations, but provided little hope for investors that there will be a major turn around anytime soon. Citigroup and Bank of America are due to release earnings over the next week, and both firms are strugling to maintain healthy capital ratios as their real estate and lending portfolios continue to decline. Both companies have seen their stocks value cut in half over the past two weeks as there is speculation that the companies will either need more money from the government through the Tarp program or be forced to begin selling off assets such as the Smith Barney venture to raise capital.
Mortgage rates have moved lower according to Freddie Mac for the 11th straight week. Fixed rate mortgage loans at historic low levels remain a bright spot with the economy and could be one of the catalysts in helping to put a bottom into the housing and stock markets at some point in the next six months.
Retail sales report sinks stock market
January 14, 2009 by admin
The health of the U.S. economy became a little clearer following the release of the December retail sales report on Wednesday. The stock market took a sharp turn lower following news that retail sales fell by over 2.7% last month, much worse than most economists had predicted. The sluggish retail sales report is a good indication that consumers are pulling back in spending as economic conditions continue to decline nationally.
The steep decline with retail sales marks the furthest drop in the market since December of 1990. Consumers have pulled back sharply as the job and housing markets have failed to stabalize. The new Presidential administration is promising a large and broad economic stimulus program to try and stabalize the U.S. economy. Most economists now believe that the economy will not begin to recover until their is a stabalization with home prices and a slowdown with home foreclosures.
Moving forward there are few reasons for optimism over the next two quarters. The market should begin to benefit from the Fed’s monetary policy changes and historic low interest rates. Refinance applications are up with every major lender for consumers trying to lock in low mortgage rates. The drop with oil prices will benefit consumers as they will have more discressionary income. The market has few other bright spots and will need to see home values begin to stabalize and companies begin to hire and recruit for a true end to the largest economic crisis since the great depression.
January 12, 2009
January 12, 2009 by admin
The stock market is on a downward beat following a rough start to the economic news front with last Friday’s jobs report. Investors are anticipated dismal corporate earnings to as major companies begin to shed light onto their q-4 numbers this week. Most investors have already priced these results into their expectations, the major question on most investors and consumers minds will be how sharply companies begin to alter their guidance for 2009.
Oil prices have moved sharply lower following a brief move up in late December. The lower commoditiy prices will be beneficial to consumers who are looking for ways to cut back on their expenses. The yield on the ten year bond has moved up slightly over the past two weeks and is now sitting at 2.35%. Fixed mortgage rates have moved up slightly as well. Consumers have jumped on board with the lower rates to refinance their home mortgages and popular fifteen year fixed mortgage loans are still in the low five percent range with major national lenders.
January 8, 2009
January 8, 2009 by admin
The market continued moving lower following dismal results from the worlds largest retail store Walmart. The company signaled that they would miss their Q-4 guidence following dismal results for holiday sales. The stock market immediately turned lower following the news. The market will eagerly await the December jobs report which is due out on Friday this week. This report has the potential to dramatically move the market and set the tone for the economy over the next thirty days.
Freddie Mac, the nations second largest agency lender reported some good news for the economy and homeowners. Fixed mortgage rates continue moving lower and a popular choice for refinancing, the fifteen year fixed mortgage loan is well under five percent. The reduced rates have led to increased refinancing activity for almost all mortgage lenders, but has not significantly improved home buying and the housing industry to date.
