July 29, 2009
July 29, 2009 by admin
The stock market continued moving lower on Wednesday as investors appear to be taking a more cautious approach to equities following the recent short bull rally. The major news of the day centered on the energy sector, which led a broad market sell off and a partnership between Yahoo and Microsoft.
The technology market appeared less than inspired following the long await partnership for Yahoo and Microsoft, one that will provide Microsoft an additional platform to market their Bing search engine as the companies collectively work to try and gain ground against market leader Google. The partnership did not ignite a rally in share price for either company or the reality of the synergies and economic benefits being realized are likely over one year away at this point.
The energy market was instrumental in leading the overall stock market lower. The price of oil dropped almost $4 per barrel today, one of the largest declines in the past two years as news reports leaked of accumulating supply levels and weakening demand. This abrupt sell off in oil has erased the gains oil prices have realized as they have benefitted from the broader market rally over the last three weeks. The short term proposition for oil to move over $70 per barrel is looking less likely as the Labor Day holiday is now less than five weeks away. The drop in oil will aid the market and help reduce the only true inflationary threat in the economy today.
Yesterday, the market received some great news from the S&P Case Schiller report which indicated that home values on average in the nations largest twenty metropolitan areas have increased for the first time in the last three years. This was the third report this month that indicated the housing market is improving. The solid economic report on housing was challenged by a weaker than expected report on consumer confidence. This report, however reflects the sentiment from June and the strong July stock market rally and improved housing numbers could dramatically alter the outlook of confidence in July and the months ahead.
Mortgage rates have drifted sideways over the last two days, despite the sell off in the equity markets. The mortgage bond market is being pressured by results of the Fed’s most recent auctions, which have pushed the ten year bond above the 3.65% level. Fixed rate mortgage loans are averaging five and a half percent with national mortgage lenders, relatively unchanged over the last week, but below their peak levels of early June. The next major report that will impact mortgage rates is the July job market report due out next week. This report will crystallize if the economy has truly found a bottom and is on the way to higher ground or if the recent rallies in equities are false signals of optimism this year.