June 4, 2009
June 4, 2009 by admin
The stock market is returning to more normalized trading patterns as investors regain confidence and rely on the economic reports and corporate guidance to influence their investment decisions. The likelihood that oil will again be a major economic focus for investors and consumers continues to grow as the price of oil is close to surpassing seventy dollars a barrel. The oil cartel known as OPEC is likely feeling a jolt of relief now that oil prices have doubled off of their March lows. Consumers are going to feel a a significant challenge in their budgets with the average gallon of gasoline expected to pass $3 per gallon over the next thirty days.
The stock market received some welcome news on the labor front today, ahead of Friday’s critical labor market report. For the first time in the past twenty weeks, unemployment claims declined, although the number of Americans claiming unemployment benefits is still in excess of six million. The news has provided a bit of optimism in the equity markets and the stock market is looking to put Wednesday’s decline in the rear view mirror. Indications from major retailers such as Target, Kohls, TJ Max also have been a focus on investors as these companies provided updates to their May store sales that have been mixed in sales volumes.
The Treasury department is gaining more attention from bond investors as they are attempting to keep the secondary market prices from surging. More and more investors are concerned that the Treasury department is accumulating too much debt as they are forced to try and finance the U.S. out of its current recession. Evidence of the concerns in the market can be traced to a few areas, the rising yield on treasury bonds, the ten year bond is again above 3.6% and concerns that the U.S. could lose its AAA bond status, although the latter has been temporarily dismissed by the worlds leading bond agencies. The rising treasury prices are having a negative impact on the housing market as mortgage rates are on the rise. Fixed rate thirty year loans are now well above 5% with most lenders. If the current trend with rising rates continues, the FOMC will likely have to make another commitment to purchasing mortgage backed loan securities as they attempt to keep rates at or near their historic low levels to try and keep the housing market recovery moving forward. Mortgage rates are somewhat flat this week, but have moved up over fifty basis points in the last two weeks. This is likely to slow the volume of refinance applications with lenders, but is not likely to impact home purchases as rates remain well below historic levels.