June 26, 2009
June 26, 2009 by admin
The stock market failed to finish the day in positive territory. This week has been especially volatile for the equity markets as growing concerns over the end to the economic recession have resurfaced, following economic reports that show weakness remains in the job markets. The volatility has benefited mortgage rates, which have moved lower for the second straight week as bond yields have followed the stock market lower.
The Treasury held an auction on Thursday for seven year bonds, which resulted in much stronger demand than most market observers, had anticipated. The positive auction demand helped bring in yields on all of the treasuries, and the ten year bond has dropped below 3.6% and finished the Friday at 3.54%, over forty basis points lower from its peak earlier this month. The drop in yields has helped to benefits rates on long term mortgages. Fixed rate thirty year mortgage loans are now in the lower to mid five percent range, and back under five percent for fifteen year loan terms.
Earlier in the week investors pulled sharply out of the equity market as news of existing jobless claims were higher than anticipated. Clearly, all eyes of the economic recovery will be focused on how soon the job market finds a bottom. Since the current economic recession has begun, over six million Americans have lost their jobs and the national unemployment rate is likely to pass ten percent by the end of the summer. Stabilizing the job markets was a major focus of the Obama administration and the government stimulus programs.
Consumers continue to ratchet up their level of savings. The national savings rate is closing in on seven percent, which would be the highest level it has reached in the last fifteen years. Consumers are likely to continue to increase their savings levels through the balance of 2009, as the market continues moving into more conservative financial positions.
Looking ahead, the market will continue to focus on corporate earnings and fresh economic data. The fear over the rapid increase of debt for the U.S. Treasury seems to have passed, helping to ease the pressure on Treasury yields and mortgage rates. Oil prices continue to hover near $70 per barrel and the equity markets will likely remain volatile as investors gauge the timing of the end of the current recession. The upcoming June jobs report could set the tone for the markets for the balance of the summer.
