April 28, 2009
April 28, 2009 by admin
The stock market remains under pressure from concerns over the swine flu outbreak. Investors pulled back on Monday as growing concerns that the flu outbreak and the possible spead outside of the U.S. and Mexico. The market still has a chance to end the month of April on a positive note and stay above the 8,000 point level, however their are a number of experts who are predicting there will be a stock market pullback at some point in the next thirty days as investors look to lock into the profits they have gained over the past two months.
Financial stocks have led the charge over the past two months with companies such as Bank of America, Wells Fargo, Citigroup and JP Morgan all posting better than expected quarters for the first part of 2009. The stock market was also very kind to the banking stocks, but the feel good story may soon be coming to an abrupt end. Rumors were circulating on Tuesday that the government believes that both Citigroup and Bank of America will need to raise more capital. The companies balance sheets, which have come under fire time and time again over the past six months, as their requirement to raise loan loss reserves to offset growing loan delinquincies continues to increase, could again serve as the companies achiles heal. The companies have struggled with placing values on their assets and loan portfolios and are working within the mark to market accounting rules that have been heavily criticized. The mark to market rules attempt to quantify an assets current value versus a future value and must take into consideration assumptions based on future losses and market conditions. The banking regulators will look closely at the tarp recepients methodology for calculating the value of their portfolios, assumptions for future loan losses and the banks off balance sheet positions. The off balance sheet position for bank and financial companies will be of critical importance as this will be the first time that at third party agency will have a chance to examine the off balance sheet items. The off balance sheet items are not generally mortgage loans or mortgage bonds, but are more likely derrivatives and credit default swaps.
The stock market uncertainty has been good for fixed mortgage rates. Long term fixed rates for both thirty and fifteen year loans have edged down slightly over the past week. Despite the slight upward tick of the ten year bond (2.96% on Tuesday) long term fixed mortgage rates have moved down about 1/8 of a percent over the past week and are now available under five percent on both fifteen and thirty year loan terms.