October 1, 2009
October 1, 2009 by admin
The month of October is starting on a down note for stock investors. The DOW Jones was off nearly 200 pts in trading on Thursday as Investors pulled back on equity investments following this mornings weekly job loss data. The market has been slowly falling over the last two weeks, after nearly surpassing the 10,000 level in mid September. Investors are becoming more concerned that the challenges in the economy will linger well into 2010 and this concern is pushing more investors to look into bonds, which has been good for mortgage rates.
The financial industry, one of the largest winners in the market since early March, is feeling significant pressure from a report released today from the American Bankers Association (ABA). Today’s news echoed concerns that many experts believed could become one of the economies Achilles heals, delinquencies. The association reported a record surge in delinquencies for credit cards and home equity loans. Consumers, have clearly drawn a line in the sand with paying only the bills necessary to survive in this economics tsunami and lenders are struggling to recover unsecured loans. The percentage of credit card delinquencies surged past five percent, the highest levels in recorded history for this report. These figures will likely carry through to the largest increase of personal bankruptcy fillings this decade. The news could not come at a worse time for CIT, one of the nations largest middle market lenders, which is on the verge of bankruptcy. The company, which has borrowed money from the TARP was struggling to restructure its debts with creditors and could be forced into BK in the near future.
The headline story of the day was the increase in unemployment claims for the week. Claims shot up by 20,000 applications, a figure that is sending shockwaves through the market. The sentiment that the labor markets were improving because job losses were slowing has helped to drive the equity markets. The larger challenge moving forward is the lack of job growth to help the over six million individuals who have lost their jobs in the last two years. The labor market, was one of the critical areas of the Presidents spending policy for this year and has yet to live up to the promises of job growth. Corporate America to date appears to be more focused on their bottom line costs, than positioning themselves for future growth opportunity.
The dismal day for stocks has a silver lining for mortgage brokers across the country. Interest rates for thirty year fixed home loans have now dropped below five percent with most national mortgage lenders. The drop in equities have pushed many investors back into bonds, as witnessed by the ten year treasury bond which is closing in on 3.2%, its lowest level since February of this year. The move by investors back into bonds could help fuel another refinance boom for the banking industry as well as provide a catalyst for home buyers to get off the fence before the governments tax rebate comes to an end in November. The pending home sales report released today from the National Association of Realtors indicated another month of improved figures. The real estate market could finish the year on a strong note if the low interest rates help to push sales forward. Long term thirty and fifteen year mortgage rates are officially at their lowest levels since January and remain well positioned to hover in this range for the near future.