February 17, 2010
February 17, 2010 by admin
The stock market has struggled with putting back to back gains together for the better part of the New Year as investors have witnessed a roller coaster ride between sharp rallies and steep declines. The recent two day rally this week has helped bring the Dow back above the 10,000 point level, but has done little to ensure that the market will change its tug of war tactics between buyers and sellers anytime soon. The stock market is taking cues from better than expected figures from the housing market.
The real estate industry certainly will be at the focal point of any type of economic recovery this year. The strong rebound in home sales for the second half of 2009 played a key role in helping to stabilize the equity markets as well as begin to place a floor under the bottom of home values across the country. Real estate benefitted greatly from the tax rebates and ultra low interest rates witnessed last yean and appear poised for another short term rally ahead of Aprils deadline to lock in the revised tax credits. The Fed’s decision to hold interest rates steady has helped influence long term mortgage rates to remain at extremely attractive levels. Most national mortgage lenders were offering thirty year fixed rate home loans at or below five percent and well into the mid four percent range on shorter loan terms. Yields on the ten year Treasury bond remain in the 3.7% range with minimal inflationary pressure on the short term horizon. Loan rates remain heavily subsidized by government actions and could be at attractive levels through the beginning of the summer as the FOMC remains committed to keep rates low to help spur on economic growth. Most economists now believe there is no chance that the FOMC will consider raising interest rates until the last half of the third quarter of this year.
International markets are becoming a greater influence on the performance of the U.S. stock market as well as the bond markets. Concerns over debt financing and debt levels are again a focus that will need to be monitored as large swings in volatility could quickly drive up or down equities and also greatly influence the amount of buyers moving in and out of the bond market, which could push interest rates at unexpected times to change quickly. Greece, Japan and Dubai have all recently been in the news and have influenced the U.S. markets.