July 23, 2009
July 23, 2009 by admin
The stock market is flirting with the 9000 point level for the first time in the past six months as a better than expected housing report, combined with a number of better than expected corporate earnings reports has lifted the stock market. The stock market surge has regained life in the month of July as investors are looking into 2010 as a realistic point for the economy to begin a full recovery. The improved levels in the stock market will also lead towards higher expectations for earnings and economic reports in the coming months. Improving confidence in the market will help both consumers with purchasing and corporations with hiring, both key components to ending the economic recession.
There were two major economic reports that hit the market today. The first report was the weekly job loss report. Job losses continue to be the economies Achilles heal, continuing claims trended downward, with an uptick in initial claims, a mixed report that did not move the market significantly. The second major economic report released today was the existing home sales report for the month of June. The report indicated a move up over 3.5% last month, stronger than most experts were predicting. The housing inventory is also beginning to see a decrease with inventory. Reducing home inventory is a critical step towards bringing a balance to the housing markets and helping to find a bottom to the market, to help restore home value appreciation. The existing home sales improvement can be traced to the government tax rebates, historically low mortgage rates and great supply of homes.
The market has been digesting corporate earnings reports for the last two weeks. Today the market gained additional confidence as Ford, UPS, and AT&T combined to beat most expectations. Corporate earnings have been consistently beating on both revenues and earnings over the last two weeks, which has been instrumental in lifting the Dow almost 800 points over this period of time. Investors have move aggressively back into the equity markets with a belief that the economic woes have seen their worst levels and brighter days are in the future for the economy. Oil prices are continuing to move higher, approaching the $70 per barrel level again for the first time in the last thirty days. There is a good chance that the price of oil has peaked for the year. The price for a barrel of surpassed $71 earlier in the year, considering that Labor Day is less than sixty days away
Mortgage rates have remained relatively steady over the last two weeks, despite the rapid improvement in the equity market. The yield on the ten year Treasury bond is still well below levels it reached in early June and moved slightly over the 3.6% level on Thursday. Fixed rates for thirty year home loans have moved up roughly .125% over the last two weeks and are around 5.25% with most national mortgage lenders. The housing market is likely to continue to benefit from the current low rates, combined with improved investor psyche with a rebound in the equity markets.