August 10, 2009
August 10, 2009 by admin
The stock market has moved lower on Monday, following a strong jobs report from last week and a solid week of gains in the stock market. The market appears to be in a position of uncertainty as investors are looking to lock in investment gains and wait for the next piece of the economic/earnings puzzle to better gauge the short term outlook. The last month the stock market has gained almost 1000pts and many experts believe this growth rate is not sustainable and that a correction is likely to occur. The current market has not sold off sharply, so it appears that, if a correction is likely to occur then it will need to be sparked by disappointing economic news or political fallout. There are only a handful of companies that still have not reported their second quarter earning, removing corporate guidance from the current marketplace could add to the expected volatility this month as their will be less information to move the markets overall.
Freddie Mac, the countries second largest agency mortgage lender, today provided some great news to their investors as well as the real estate industry. Freddie Mac, like its counterpart, Fannie Mae, has taken billions of dollars in aid from the government, simply to stay in business. Today, the company announced during its second quarter earnings release that it believes that it will not need additional capital to remain solvent. This is surprising news, as last week, Fannie Mae announced they would seek billions more in capital in order to maintain necessary capital ratios and continue lending. Freddie Macs, report comes during a time when there are a number of indicators that are pointing to a housing market bottom and the beginning of a recovery in the real estate industry. Freddie Mac, has been aggressively modifying its mortgage loans and has been aided by the low mortgage rates available this year to inject fresh earnings into its capital base.
Mortgage rates will remain in focus this week, as today CBSMarketwatch is reporting that the Fed is likely to discontinue their policy of purchasing treasuries, a move that could impact the bond market, and force long term bonds to move higher, directly impacting long term mortgage rates. Interest rates have remained well under six percent for the entire year, and most national mortgage lenders are offering fix rate thirty year home loans at or below five and a half percent. The yield on the ten year bond, has moved up above 3.7%, but has dropped below 3.8%, the current high point for the past sixty days. The news out of the Fed could push yields higher on treasuries, which would likely drive fixed rate mortgage loans to move higher (above six percent). The Fed’s decision to exit out of their treasury purchasing program comes at a time when housing numbers are improving, but could be too quick, as the long term implications of raising rates could work to slow down home sales, further dragging down the economy. This will need to be closely followed by home owners who have not refinanced to date, or potential home buyers that are presently on the fence.