June 17, 2009
June 17, 2009 by admin
The stock market looked to regroup following two days of strong selling. The major economic news of the day was the release of the CPI report for the month of May. Consumer level inflation rose slightly more than expected, thanks in large part to the rapid increase with energy prices. Inflationary concerns have reemerged in the market only recently as economists weigh the implications of rising oil prices in a struggling economy. During the past twelve months, total CPI has actually declined at the fastest level in the last forty years as the worlds global economy fell into the current recession. Stocks have broken back under the 8500 point level, and are the next floor appears to be 8000 on the low end. Investors are also turning there attention to corporate earning reports to gauge the prospects of an economic recovery. A report released today from FedEx was a factor in early selling, and it is likely more investors will begin to review earnings and guidance reports in determing their short/long term equity positions.
President Obama is promising more regulations and changes to the financial markets. The President is working hard to put into place additional measures to prevent the opportunity of another mass financial meltdown in the market. There are a number of concerns being raised over the proposals, including the idea a newly created resolution authority, created to oversee large interconnected banks and financial firms. The concerns are mostly centered on the makeup of the regulatory firms and there ability to comingle within the Fed, Treasury or current banking industry. The idea of regulatory reform is likely to be welcome news to main street, as ordinary Americans want to eliminate the potential for companies such as AIG (too big to fail) from ever being created again.
The pullback in the stock market has helped to push investors back into the bond market, as a result interest rates on fixed mortgage loans have moved lower. The yield on the ten year Treasury bond has dropped almost 40 basis points over the last week, and fixed rate mortgages have move closed to 5.5% for thirty year terms. It is too early to predict if the rapid rise with interest rates in late May or the current pull back to today’s rates will last. Oil continues to pressure the market as seen with today’s CPI report and long term threats of inflation have a history of causing lending rates to increase.