Good Morning Everyone and Happy Tuesday! The sour mood prevalent in equity markets today is largely the result of weakness in Asian and European markets over night. Most Asian markets closed down over 1% -- Japan's Nikkei was down 1.3% to its lowest level since May of 2009. European markets followed suit as all bourses closed in the red, most of them down around 1.5%. It's actually interesting to click on world markets and see all the red. Only China's Shanghai Composite closed in positive territory of all the true major indices around the globe.
Here in the States, traders had to overcome fears from comments of a second recession and dwindling optimism that the economic recovery, slow as it may be, is losing steam and we're sinking back into negative growth. Ben Bernanke will address this on Friday. As insurmountable a task as this one might have seemed, Existing Home Sales was released to put further pressure on the market. It was reported by the Nat'l Assoc of Realtors that existing home sales dropped, or should I say plunged, 27% month-over-month. The figure for existing sales came in at 3.8M which is quite a difference from the 4.7M anticipated. We anticipated this might happen when the tax credit expired, and boy did it happen!
The Dow dipped below the 10,000 mark earlier this morning for the first time in a month, and although we've recovered some of those losses, there's not really anything on the horizon that leads us to believe we'll have a sustainable rally for some time. Do I seem a little pessimistic about the economy? Well, I guess I am, but at the same time I'm optimistic about interest rates and what's happening in the bond market today.
The yield on the 10 year note hit 2.46% earlier in the session -- its lowest mark in 17 months. The 2 year note yield dropped to .45% earlier this morning -- a record low. The difference between the 2 yr note yield and the Fed Reserve's target lending rate reached its narrowest point since December of 2008 -- amid the financial collapse many of the country's largest banks. These are truly fearful times for traders and the short term future of our economy. Good news is . . . rates thrive on bad news, and rates are smokin' hot lately. Hope you can take advantage of it!
Tuesday, August 24, 2010
Monday, August 23, 2010
News From Ara MELKONIANS/ Week of 8/23/2010/ Update #1
Good Morning Everyone and Happy Monday! Last week was almost a wash for traders on Wall Street. The Dow lost a mere 89 points for the week, the NASDAQ gained 7 points and the S&P lost 7. However, credit markets improved and pricing improved . . . and oil prices dropped . . . what's there to complain about? Refinance applications are up and turn times at the wholesale shops are getting longer and longer. I guess that's good news for all of us.
At the combined CAMP and CMBA conference last week there was a presentation by an economist from Stewart Title. He showed a very interesting graph up on the screen about the amount of money that borrowers can finance at these low rates. That same amount of principle drops about 5% for every .50 of a point rise in rate. Thus, if average rates go up 2% points (from 4% to 6%), borrowing power (the amount financed possible) drops by 20%. Hence, this is the time to refinance… Borrowers can keep their payments low and borrow so much more at these rates today!
No major economic news releases are on tap for today, so markets are reacting to some M&A activity taking place this morning in the corporate board rooms of companies like HP, Dell, Campbell's soup and Miller beer (not all bidding for the same acquisitions of course). Look for markets to be adrift all day today as traders basically have rumors on which to gauge their direction. Credit markets are good, but volatility indexes are tough to read.
I hope you have a terrific Monday, and a very profitable and prosperous week!
At the combined CAMP and CMBA conference last week there was a presentation by an economist from Stewart Title. He showed a very interesting graph up on the screen about the amount of money that borrowers can finance at these low rates. That same amount of principle drops about 5% for every .50 of a point rise in rate. Thus, if average rates go up 2% points (from 4% to 6%), borrowing power (the amount financed possible) drops by 20%. Hence, this is the time to refinance… Borrowers can keep their payments low and borrow so much more at these rates today!
No major economic news releases are on tap for today, so markets are reacting to some M&A activity taking place this morning in the corporate board rooms of companies like HP, Dell, Campbell's soup and Miller beer (not all bidding for the same acquisitions of course). Look for markets to be adrift all day today as traders basically have rumors on which to gauge their direction. Credit markets are good, but volatility indexes are tough to read.
I hope you have a terrific Monday, and a very profitable and prosperous week!
Friday, August 13, 2010
news from ARA MELKONIANS/ week of August 9, 2010
Good Morning Everyone and Happy Friday! Last week's stock market rally added nearly 200 points to the Dow (see Monday's email blog), that's the good news for bullish traders. Unfortunately, this week has been quite a disappointment for those hoping to add to the 3 week long weekly rally which saw the Dow gain over 500 points. This week, if we were to close at this level at which we presently sit, we will have lost a little over 350 points for the week.
Stock markets around the globe seem to have settled down early this morning and the same calm (or maybe exhaustion) is present in our equity markets. I say this because Hong Kong's GDP came in lower than expected and Germany announced stronger than expected GDP . . . yet most markets around the globe closed with less than .5% reaction one way or the other. Traders in the US equity markets are receiving a mixed bag of economic data giving no real direction for which markets to move.
Advance retail sales showed a 0.4% increase, but that was slightly less than the 0.5% increase that had been widely expected. Prior month sales were revised upward to reflect a 0.3% decline. Excluding autos, retail sales were up just 0.2%, which is in line with expectations. July's Consumer Price Index made a 0.3% monthly increase, which is slightly sharper than the 0.2% increase that had been widely expected after a 0.1% decline in the prior month. Excluding food and energy, consumer prices were up only 0.1% month-over-month, as anticipated.
This CPI report counter's last month's deflationary numbers and sparks the debate on whether the Fed should be more concerned about inflation or deflation, and what tools the Fed has left to do anything about it anyway? The debate rose to a shouting match this morning on CNBC -- did you see it? If not, go to CNBC.com and see the recap. I thought Chicagoan Rick Santelli was going to have have a conniption fit. I love that guy's passion for his job.
The preliminary August Consumer Confidence Survey from the University of Michigan came in at 69.6, in line with the reading of 70.0 that had been widely expected, and represents an improvement from the 67.8 that had been recorded in July. The dollar is strong, oil prices keep falling and credit markets have recouped the small losses from the last couple of days. All this should mean very good rates today once again.
Look for the markets to be quiet throughout the day as traders hit the road for the weekend. I hope you have a terrific Friday and a very restful and relaxing weekend!
Stock markets around the globe seem to have settled down early this morning and the same calm (or maybe exhaustion) is present in our equity markets. I say this because Hong Kong's GDP came in lower than expected and Germany announced stronger than expected GDP . . . yet most markets around the globe closed with less than .5% reaction one way or the other. Traders in the US equity markets are receiving a mixed bag of economic data giving no real direction for which markets to move.
Advance retail sales showed a 0.4% increase, but that was slightly less than the 0.5% increase that had been widely expected. Prior month sales were revised upward to reflect a 0.3% decline. Excluding autos, retail sales were up just 0.2%, which is in line with expectations. July's Consumer Price Index made a 0.3% monthly increase, which is slightly sharper than the 0.2% increase that had been widely expected after a 0.1% decline in the prior month. Excluding food and energy, consumer prices were up only 0.1% month-over-month, as anticipated.
This CPI report counter's last month's deflationary numbers and sparks the debate on whether the Fed should be more concerned about inflation or deflation, and what tools the Fed has left to do anything about it anyway? The debate rose to a shouting match this morning on CNBC -- did you see it? If not, go to CNBC.com and see the recap. I thought Chicagoan Rick Santelli was going to have have a conniption fit. I love that guy's passion for his job.
The preliminary August Consumer Confidence Survey from the University of Michigan came in at 69.6, in line with the reading of 70.0 that had been widely expected, and represents an improvement from the 67.8 that had been recorded in July. The dollar is strong, oil prices keep falling and credit markets have recouped the small losses from the last couple of days. All this should mean very good rates today once again.
Look for the markets to be quiet throughout the day as traders hit the road for the weekend. I hope you have a terrific Friday and a very restful and relaxing weekend!
Monday, August 2, 2010
Update #1/ ARA MELKONIANS/ week of August 2, 2010
Good Morning Everyone and Happy Monday! Today starts a new week and a new month . . . and stock markets are off to the races to get August off to a great start. July ended up being quite a good month for the Dow and the S&P. The Dow's rally of 7.1% last month was the best month it has had since last July. The S&P jumped 6.9% last month to post its best month in a year also. Much of the gains were due to global stabilization of credit markets as Europe conducted its stress test on banks and many passed with flying colors.
On that same subject, HSBC, Europe's biggest bank, reported this morning that their first half of the year's before-tax profit topped $11 Billion, much better than the $8.8B anticipated by the analysts. Much of this profit is due to the North American unit posting a profit for the first time in 3 years. Hence, with the Euro rising, our US dollar is weak today which usually helps the stock markets rally.
The biggest story that affects us in the mortgage industry today is the comments from Bill Gross on deflation. Bill Gross, of PIMCO -- the world's largest manager of bond funds, is probably the most respected fund manager in the country. His fear of deflation going forward is based on falling home prices, flattening labor income and the possibility of a slowing economy going forward. This will keep investors focused on the long bond (which he manages) and will keep mortgage interest rates low for the foreseeable future.
Ben Bernanke, speaking this morning in South Carolina, continued his mantra that the economy is in a slow recovery. This campaign comes on the back of the GDP results last week showing a 2.4% growth for Q2. Although, he went on to say, the growth is not enough to address the continuing unemployment problem that plagues our country.
The Institute for Supply Management's manufacturing gauge fell to 55.5 in July from 56.2 the month previous, but any reading over 50 points represents expansion. July's number topped expectations of 54.5 from the experts. Construction spending surprisingly grew 0.1% in June according to the Commerce Dept. Experts were looking for a drop of .5% -- so as you can imagine, these two reports have helped fuel the big rally on Wall Street this morning.
Fortunately, credit markets aren't getting hammered too badly, possibly buffered by the outlook from Bill Gross. August is starting off with a big rally, we'll see if the bulls can hold their gains. I hope you all have a terrific Monday and a very prosperous and productive week!
On that same subject, HSBC, Europe's biggest bank, reported this morning that their first half of the year's before-tax profit topped $11 Billion, much better than the $8.8B anticipated by the analysts. Much of this profit is due to the North American unit posting a profit for the first time in 3 years. Hence, with the Euro rising, our US dollar is weak today which usually helps the stock markets rally.
The biggest story that affects us in the mortgage industry today is the comments from Bill Gross on deflation. Bill Gross, of PIMCO -- the world's largest manager of bond funds, is probably the most respected fund manager in the country. His fear of deflation going forward is based on falling home prices, flattening labor income and the possibility of a slowing economy going forward. This will keep investors focused on the long bond (which he manages) and will keep mortgage interest rates low for the foreseeable future.
Ben Bernanke, speaking this morning in South Carolina, continued his mantra that the economy is in a slow recovery. This campaign comes on the back of the GDP results last week showing a 2.4% growth for Q2. Although, he went on to say, the growth is not enough to address the continuing unemployment problem that plagues our country.
The Institute for Supply Management's manufacturing gauge fell to 55.5 in July from 56.2 the month previous, but any reading over 50 points represents expansion. July's number topped expectations of 54.5 from the experts. Construction spending surprisingly grew 0.1% in June according to the Commerce Dept. Experts were looking for a drop of .5% -- so as you can imagine, these two reports have helped fuel the big rally on Wall Street this morning.
Fortunately, credit markets aren't getting hammered too badly, possibly buffered by the outlook from Bill Gross. August is starting off with a big rally, we'll see if the bulls can hold their gains. I hope you all have a terrific Monday and a very prosperous and productive week!
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