Rate Update – April 26, 2009
April 24, 2009 by admin
The stock market moved higher following a better than expected report for new home sales. The stock market has slowed down from the March rally in April and is more closely digesting both economic reports as well as corporate earnings and guidance. The new home sales report for the month of March was flat, but the months of January and February were revised upward, providing some fuel to the optimism that the housing market may have finally reached it’s bottom and could begin to claw its way upward in 2009. Earlier this week the existing home sales report for the month of March indicated a slight pullback with sales of existing home inventories. The reports, which are both subject to revisions clearly indicate that the market is not going to move up quickly, despite tax rebates from the government and record low mortgage interest rates.
There were a number of key earnings reports released this week, investors gained confidence in equities as Microsoft and Ford Motor company provided some welcome news to investors this week. The stock market will also closely watch news this afternoon from the treasury regarding bank stress tests. The government is scheduled to release information regarding how these tests would be conducted, what assets are included and how they would deal with the banks off balance sheet financials. This could be a major market mover and could influence financial stocks which have seen a rapid share price increase across the board over the past sixty days. Companies such as Citigroup and Bank of America could be the most heavily scrutanized of the big banks following the billions of dollars in Tarp money they have received.
The mortgage industry has benefited sharply from record low mortgage rates, and by all indications there is little reason to believe that interest rates will be moving up sharply in the near future. Fixed rate thirty year loans were available at or below the five percent mark this week. The yield on the ten year bond has moved up to 2.96%, perhaps a leading indicator that fixed mortgage rates could be moving up. A number of reports released this week indicated a strong belief that the government would be closely monitoring mortgage rates and the FOMC will be doing everything within its powers to help keep rates low this year. This move is designed to help jump start the housing market as well as help strugling home owners refinance their home mortgages into fixed rate loans, freeing up disposable income that could find its way back into the economy.