October 12, 2009
October 12, 2009 by admin
Stocks jumped in trading on Monday as investors again set their eyes on surpassing the 10,000 point level for the DOW. The market, has posted 3 days of rapid gains in the process of regaining almost 500 pts over the last two weeks. The perception that the month of October is a challenging month for stocks could be shattered over the next three weeks if confidence continues to grow. The jump in the equity markets is carrying over to the bond markets, yields on the ten year Treasury bond have surged in the past few days, moving up almost 25 basis points. This movement in the bond market is directly influencing a push to move long term fixed rate mortgage loans higher. The news media, has been touting a drop with interest rates to below five percent, unfortunately this weeks headlines, did not take into consideration the rapid changes in the broad based markets. Most national mortgage lenders are again offering thirty year fixed rate home loans above the five percent level for thirty year terms. Borrowers who desire interest rates below five percent will have to consider a fifteen year loan term or the possibility of paying points to buy down their mortgage rate.
The optimism in the market has pushed oil prices to their highest levels of the year. Oil, has nearly $74 per barrel for the first time in 2009 a move up reflecting confidence in the global economy. The upward movement in oil prices carries the only inflationary risk in the economy today. Energy prices have been relatively stable for most of the year, helping to keep discretionary income available during the toughest times of the recession. The drop in natural gas prices will help home owners and businesses this winter to save money for other expenses or investments.
The economic news will begin to pick up this week as investors begin to gauge key reports from leading corporations that could shed light into the balance of 2009 and the future of 2010. To date, many analysts believe corporate profits have been driven by cost cutting measures, as witnessed by the growing number of unemployed. The market will need to show signs of growing into 2010, despite the challenges that are in place for further advances in the equity markets. Today, one of the major news stories was from James Ballard, a member of the board of the Federal Reserve. Mr. Ballard echoed concerns shared by a growing number of economists who have predicted unemployment to continue escalating and job creation to take up to 24 months to work its way through the economy. The overall negative sentiment for job growth is clearly one of the largest issues facing the economy and markets. Speculation that the government could look into a third round of policy stimulus has begun to resurface and could grow in sentiment if the October jobs report is as disappointing as the September report was. The optimism in today’s market faces a number of uphill challenges, but for the interim, interest rates are moving up.