August 19, 2010
August 19, 2010 by admin
Jobs are certainly the largest component to any economy and has the potential to drive markets sharply. Today, we witnessed another example of the fallout from the employment sector as unemployment claims jumped to their highest levels in the last nine months, news that quickly led to a dramatic sell-off on wall street that sunk the DOW by over 150 points. The probability of a double dip to the economic recession is almost becoming a certainty as day by day the economic news continues to point to a grim road towards recovery. The lack of job creation and employment stability is clearly going to hang over the market for quite some time. The major challenge to the economic recovery is the lack of private capital being put to work. The 2009 and early 2010 rebound to the economy was fueled by the government stimulus programs, but as this money has exited the market, the economy has not shown that it is able to continue growing, a trouble concern for the government. While there have been calls for additional stimulus, there is a growing voice in Congress pushed hard by the (tea party) that is saying we are digging ourselves a large whole and need to look at dramatic reduction, not more economic stimulus. If we look to countries such as Greece and Spain it is clearly justifiable to be concerned that additional borrowing will likely do more harm that good when it comes to the state of the economy.
The sell off in stocks helped bond yields move lower and long term mortgage rates dip to their lowest levels in over forty years. The ten year bond, a strong indicator for long term mortgage rates is now under 2.6% closing on Thursday at 2.58%. Long term mortgage rates were being offered at 4.375% for thirty year loan terms with major national mortgage lenders and could be moving lower if the equity market continues to show signs of weakness.