July 1, 2009
July 1, 2009 by admin
The month of July has greeted investors on a positive note. Stocks moved up sharply in early trading as the second half of the year brings renewed optimism that the economic recession could be winding down and corporate earnings could trend up heading into 2010. There were three major reports released today that have helped move the market. The private sector ADP report which tracks the private sector and job market, showed further erosion within employment, although slightly below some economic predictions. The ADP report, showed revised job losses for the months of May and April to be slightly lower than first published.
The institute of supply management reported that manufacturing rose slightly in the month of June, providing further evidence that the economic slowdown is winding its way downward. The housing market also showed a slight uptick for the month of May, but at a much slower pace than the month of April. Pending home sales rose one tenth of a percent for the month. The housing market is being strongly influenced by the government tax rebates (up to $8,000) and abundant inventory.
The housing market will be closely followed for the remainder of the summer. Thursday’s job report will provide further direction for the possibility of a housing recovery, as the housing market and job market are closely aligned. Since the first week of June, mortgage rates have dropped almost ½ percent. Yields on long term bonds have dropped over forty basis points during this period as investors are repositioning themselves amongst the uncertain economic times. Home mortgages often move higher as the stock market moves higher, following investors who are moving money out of bonds (lowering the demand/raising the yield) and into stocks. The average rate for a thirty year fixed rate home loan is now at or below 5.5% nationally on thirty year loan terms with most national mortgage lenders.
The month of July will likely be another month of continued volatility in the equity markets. Oil prices are again above seventy dollars a barrel, one of the only commodities that will likely influence inflation this year. Consumer confidence remains subdued, but has improved this year following the sharp falloff in January and February. The jobs report on Thursday will likely impact the sentiment of the market heading into a holiday shortened trading week.