August 31, 2009
August 31, 2009 by admin
International markets sold off over the weekend, setting the stage for a broad market decline on Monday, the last day of August. The market was down a full percent in early morning trading, but managed to recover late in the day as equity investors appear to becoming more concerned that the rally has run its course. The yield on the ten year Treasury bond has dropped to 3.4%, its lowest level in the last sixty days. The recent drop with bond yields is helping to bring down long term mortgage rates for both fifteen and thirty year fixed loans to their lowest levels since early March. The below market rates should help to fuel the housing market for the balance of the summer and ensure home owners who need to refinance or home buyers looking to close a purchase in the next sixty days. Thirty year fixed rate loans were available at or below five and a quarter percent on Monday with most national mortgage lenders.
The drop in the stock market is not entirely unexpected. The rally that has lifted the market broadly since early March has already started to see profit taking by investors who have managed to recoup partial losses or lock in new profits. The fallout of today’s equity market may not be significant. The psyche of investors appears to be changed from earlier in the year when panic and greed were the driving factors. Today, more investors appear to be taking a longer term outlook with the equity markets, a signal that the overall economy has stabilized.
The economic news this week could set the tone for the month of September. The labor market releases a key report on Thursday, a critical day that could attract the attention of investors who have been sitting on the sidelines. The shortened holiday week, also signals a time of less volume in the market, which could add to the volatility this week.
Corporations will likely be pulling back on their news releases as they are now well into the third quarter of the year. Analysts are going to closely follow the retail sector, specifically back to school spending as an early gauge of consumer sentiment prior to the holidays. Consumer confidence appears to be making steady improvement over the course of the summer. Consumers who have seen the stock market recover and a solid string of housing reports is the key to driving the necessary spending to help officially end the economic recession.
News out of Washington could be quite this week as well. The government is likely to turn more attention to the home loan modification program in the coming months, but results from the Fed’s move keep mortgage rates low and the home buying tax credit are certainly better than expected. The health care insurance debate could garner a majority of the governments attention for the foreseeable future, a signal that the financial markets are finally able to break away from the scrutiny and try to regain some independence