August 13, 2009
August 13, 2009 by admin
The stock market is trading sideways on Thursday following a strong rally on Wednesday with news that the fed would be holding rates steady. The stock market jumped with the reassuring news from the FOMC as there is a growing belief that the worst of the economic recession is in the rear view mirror. The market has been slowly continuing its climb up in the month of August and the S&P 500 is now over 1000 pts. Investors appear to be more focused on the upside potential for corporate earnings into 2010 as they are driving up the worldwide equity markets.
There were a few key reports released today that are weighing on the market. The month of July saw a seven percent increase to home foreclosures according to a report released today from RealtyTrac. The report will add to the frustration of consumer groups who have been clamoring for the government to more aggressively move into the housing market with loan modification programs that reduce principal balances of home loans, similar to the recent announcement of the FHA loan modification program from HUD recently. The current Making Home Affordable program was put into place with the goal of helping over four million home owners to refinance their mortgage or modify their existing loan terms, to help prevent these properties from heading to foreclosure. Consumer groups have been protesting to the government that lenders remain unresponsive to consumers, who are in process for months without communication from there loan servicers regarding their potential loan modification programs. The rate of home foreclosures increasing could jeopardize the terrific news out of the housing market last month (existing and new home sales reports). Home foreclosures are the housing markets Achilles heal as they drive down home values and increase the potential for home buyers to simply walk away from there homes, feeling they are falling to far underwater of their existing home mortgage.
The job market will be closely followed this month, following the better than expected July non farms payroll report. Today, a report on weekly jobless claims edged up by 4,000, not a huge number and is not likely to have much significance with equity and bond investors. Retail sales were off the mark for the month of July, despited the governments boost to the auto industry, retail sales declined .6% last month, a strong indication consumers are still in a savings mode.
The yield on the ten year bond has dropped down to 3.59%, its lowest level in the last week. The drop in yield, likely is a reaction to investors who are repositioning themselves out of equities and an ease from concerns out of the FOMC meeting this week. Long term mortgage rates continue to move lower with the news. Fixed rates for thirty year loan terms are now ranging between 5.25-5.375% with most national mortgage lenders. The recent fed news is likely to keep rates low in the near term, but indicates mortgage rates will be heading higher by years end.