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Weekly Economic Summary - February 5, 2010
OVERVIEW ~ There was a great deal weighing on the markets during the week of January 25 through January 29:
- the inquiry into the bail-out of the American International Group (AIG), exploring the possibility that there may have been irregularities in the decision to pay existing credit default swap contracts at full par;
- the State of the Union address;
- the Federal Reserve’s regularly scheduled FOMC meeting, to decide on where interest rates should go (nowhere, yet);
- and the probable vote on whether to re-confirm Ben Bernanke as chairman of the Federal Reserve (which Congress did).
As the week began, the Dow Jones Industrial Average (DJIA) stood at 10,172.98, and the 10-year Treasury note yield was 3.597%. By week’s end, the Dow had declined to 10,067.33. Over all of January, the DJIA fell by 3.5%. The 10-year note, meanwhile, edged up to 3.611% on Jan. 29. And the Freddie Mac average rate for the 30-year FRM was 4.98%, one basis point below last week’s average rate.
FOCUS ~ The performance of the DJIA, and of stocks in general, is watched with interest every January. Generally, the stock market doesn’t do that well over the course of the year if it doesn’t get a good lift-off in January, and vice versa. This is more a superstition than a proven fact, but investors nonetheless pay attention.
Far more important just now, though, is the market’s current overriding theme, which is wrapped up in three questions, constantly asked, but still unanswered:
- How much of the stock markets’ and credit markets’ strength in 2009 was caused by supportive governmental programs?
- How much of that strength, on the other hand, resulted from an unassisted recovery in the markets themselves?
- And how much will the market weaken when the government, stops supporting the markets?
The Fed, for example, has been buying up billions of dollars’ worth of mortgage-backed securities, thereby creating so much demand that the interest rates on these securities have remained very low. That has translated into low rates throughout the credit markets. Both Moody’s Economy.com and HSH Associates have predicted mortgage rates would be about half a percent higher without this governmental support.
This support is scheduled to stop at the end of March. Meantime, the markets may be reflecting the growing worries among investors.
Economic summary content © 2010 Right Side Marketing, (800) 456-4395. Duplication or reproduction without prior written consent is prohibited. Any opinions expressed herein are that of Right Side Marketing only. Right Side Marketing is not owned, operated or controlled by Bank of America, N.A. or its parent or affiliates.
This publication is provided for your general information only and the observations and statements expressed herein do not necessarily represent the views of Bank of America, N.A. or its affiliates. Bank of America and Right Side Marketing assume no liability for loss or damage as a result of your reliance on information in this publication. Our goal is for the content of this publication to be accurate as of the date this issue was printed. However, due to rapid changes occurring in the financial environment, and associated programs, products, and services offered within the home financing industry, we do not guarantee the accuracy or completeness of the information presented. Any information herein should not be relied upon without independent verification by the reader.
THIS INFORMATION IS INTENDED FOR MORTGAGE, REAL ESTATE AND/OR BUILDER PROFESSIONAL USE ONLY AND IS NOT AUTHORIZED FOR CONSUMER OR PUBLIC DISTRIBUTION.
Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. AR103566
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ECONOMIC INDICATORS (As of 4:30 p.m. eastern 2/1/2010)
10-yr Treasury note…3.65%
30-yr Fixed-Rate Mortgage (avg)…5.39%
Spread between 10-yr note and 30-Year FRM…1.74%
Brent Crude Oil Future…75.10
Gold 100 oz Future…1115.30
Copper…309.15
Dow Jones Industrial Average…10185.53
S&P 500…1089.19
FTSE 100…5247.41
NIKKEI…10205.02
Mortgage Bankers Association Mortgage Applications Index ~ Week ending 1/22/10
Overall
513.0 (Up 9.1%; up 0.5%
the week prior)
Purchase Money Loans
213.7 (down 10.9%; up 4.4% the week prior)
Refinancing Loans
2260.4 (down 15.1%; up 10.7% the week prior) |
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