June 15, 2009
June 15, 2009 by admin
The stock marker sold off sharply in trading on Monday as investors looked to take some profits off the table among growing concerns with bank credit card and commercial loan losses. The day was light on economic reports, but a gauge of home builder confidence showed further erosion in the housing markets may be in the future as home builders have grown yet more pessimistic of a housing recovery in the next twelve months.
The stock market sell off has been anticipated for some time as investors look to reallocate their investments following a record forty percent broad market rally over the last three months. Oil prices dipped on Monday, which could help the broader market as the price of oil has doubled since March, sending gasoline prices surging to nearly 43 per gallon.
Speculation over the health of the banking industry could grow a bit cloudier as the record number of credit card delinquencies surged last month. Credit card holders have begun to default on their card obligation in record numbers, as the job losses and dismal economy have strained budgets across the country. Reports released from American Express, Discover, Capital One and Bank of America all indicated that credit card delinquencies have jumped in the last few months, at a time when banks are raising rates and consumers are searching for new financing options, a combination that will likely take its toll on the economy and lending industry. Commercial loans and the credit card market are believed to be two areas in the banking industry that will become the next major financial challenges for lenders. The banking industry is desperate for some positive news and received a small increase in revenue from record low mortgage rates, which helped fuel a mini refinance boom. The banking industry, has also benefited from the uptick in the stock market as many of these companies are also invovled in with investment brokerages as they offer a wide variety of customer solutions.
Yields on bonds have started to drop, following a sharp rally in early June. The yield on the ten year bond broke below 3.75% and has helped to keep mortgage rates from eclipsing the six percent level. Fixed rate mortgage loans have dropped to the mid five percent range on thirty year loan terms, aided by successful government bond auctions last week and the broad sell off in the stock market. Concerns over the U.S.’s ability to finance its debt weighed heavily on the record increase in bond yields, but investors are gaining more confidence, that despite the heavy debt load to continue to finance, their remains a very attentive market for treasury bonds.