August 2, 2009
August 2, 2009 by admin
The month of July was a record setting month for the stock market. Following a downshift in June and the release of a worse than expected Jobs report for the previous month, most experts and investors would have been hard pressed to predict a month that would see both the Nasdaq and Dow finish at 2009 highs. The month of July could prove to be the turning point for the economy and mark the turn around for the housing markets.
July featured earnings reports for almost all of the S&P 500 companies, and for the most part investors were treated to better than expected performances and guidance that is indicating a light at the end of the tunnel. Key reports from JP Morgan, Caterpillar and EBAY provided a glimpse into the future earnings prospects for some of the countries most trusted brands. The market got a tremendous boost out of the housing markets as a trifecta of strong real estate reports seemed to indicate that the housing market may finally be bottoming out. The exiting home sales, new home sales and Case Schiller price report all were much better than originally predicted. The improvement in the housing market should send a vote of confidence to the government that their tax rebates and involvement in helping to keep home mortgage rates near historic low levels are finally starting to pay dividends to the housing market. The improvement in the equity and housing markets will likely carry forward to improving consumer confidence in August. These figures also could help to encourage corporate level hiring. Oil prices followed the equity markets for the most part in the month of July. Oil traded in a range of 60-70 per barrel and seemed to run into resistance at both ends of the range.
The month of August will start with heightened expectations from investors. The probability of increased volatility will increase as investors are likely to try and lock in earnings at any site of economic challenges. The market will get a great chance to solidify its direction this week when the July jobs report is released. This report could be critical in helping to determine the direction of both equities and bonds this month. The improved psyche in the market could fade quickly if the job market is not showing signs of improvement.
Mortgage rates ended the month on a downward course, despite the strong influence of the equity market rally. Rates benefitted from several strong auctions by the Fed last week, which helped to bring yields on bonds lower. The ten year bond traded between 3.35 and 3.7% for the month, Friday the ten year bond closed at 3.48%. Fixed mortgage rates touched a high point of 5.5% with most national mortgage lenders on thirty year loan terms, before dropping down to the 5.25% level to end the week. Mortgage rates have ranged between 5.125 and 5.5.% for the last sixty days, excluding a brief surge in early June as investors grew concerned over Fed debt levels. The market has been relatively steady, but the improvement in the equity market and rising oil prices could begin to pressure rates to move higher, so this will be important to watch moving forward.