August 27, 2009
August 27, 2009 by admin
The stock market is trying to extend its winning streak, despite being down by over 80 points in early morning trading. The Dow has been steadily climbing out of its hole all day, financial stocks continue to lead the way as short sellers are forced to sell off their positions, helping to ignite a sharp rally higher. Long term mortgage rates continue to hover near 2009 lows, despite the upward turn of the market over the last thirty days. Yields on the ten year bond remain below 3.5%, helping to keep fixed mortgage rates in the low five percent for thirty year loan terms. Mortgage rates have proved to be resilient against the equity market rally, despite rising oil prices and concerns over the U.S. debt levels.
The stock market move up is coming at a time when the Dow has moved into 2009 highs and investors are being cautioned to lock in profits. The upward in Financial has helped to lift companies such as AIG, Citigroup and Bank of America to year end highs. Shares of AIG, are now up close to 600% from there low point in March as short sellers are scrambling to cover positions, following the companies surprise move to profitability in the past quarter. The improvement in the housing markets has also helped to bring more investors into the company who are betting that the companies new CEO will be able to guide the company in the near future as it sells off key assets to repay the billions of dollars owed to U.S. taxpayers.
The economic news of the day focused on Jobs and GDP. The weekly job survey showed an improvement of 10,000 job losses, the first positive improvement over the past three weeks. GDP was down one percent, and likely was a strong influence in pushing the broader equity market lower in early trading.
The news on the housing market this week continues to show signs of improvement. This week, the new home sales report showed another strong month of housing gains, marking the fifth straight month of improvement. The Case-Schiller home value report also showed positive movement with home pricing in the countries twenty largest metro markets. These reports are adding to the belief that he housing market will have bottomed out in the summer of 2009 and better days are in the future. The improvement in home sales could influence the home foreclosure market if prices begin to stabilize. Home owners, concerned that their homes have lost 40-50% of their value, and showing signs of further value drop, have simply been walking away from their properties, adding additional strain to the housing market.
Despite the improvement in housing reports and forecast the lending industry appears to be under pressure as experts are now predicting that their will be over 400 bank closures in the next two years. Smaller regional and local banks that are straddled with bad debt are struggling to improve their capital ratios and have been forced into receivership by the FDIC.