Mortgage rates will rise and home prices will decline.
Thursday, March 4, 2010. 8:00 am.
There weren’t enough worries to affect consumer confidence?
The Institute of International Finance Inc. is a global association of 38 banks in leading industrialized nations that was established in 1983 in response to a previous financial crisis, the international debt crisis of the early 1980’s.
Economists debate the effect of moves underway in the U.S. and the U.K. to remove some of the stimulus programs of the last two years, for instance the Fed’s decision to stop its program of buying mortgage-backed securities, and the U.K.’s decision not to extend its program of allowing banks to exchange mortgage-backed securities for government bonds.
But the IFF has no doubts about what the outcome will be.
It says “It will have a significant impact”, that mortgage rates will rise, and home sales and prices will decline.
Being a group of major banks that include Citigroup, HSBC, and Deutsche Bank, not surprisingly the IFF also comes out against the ‘Volcker Rule’ that would prevent banks from trading for their own profits if they are in the banking business of taking customers deposits.
Yesterday in the U.S. stock market.
Another rally from the open until 11 a.m., then a giveback in the afternoon.
Yesterday’s intraday chart:
The Dow closed down 9 points or 0.1%. The S&P 500 gave up its early gains to close unchanged. The NYSE Composite closed up 0.4%. The Nasdaq closed down 0.1%. The Russell 2000 closed up 0.1%. The DJ Transportation Avg. closed down 0.1%.
The same troublesome pattern of strength in the morning giving way to selling in the afternoon.
Why is it troublesome? It is thought that the early activity each day is often the result of public investor orders placed the evening before via personal computer, or in the morning before going to work, often influenced by how the market closed the previous day (which is why the program trading firms often flood buy programs in late in the day to try to close the market higher). Those orders will be executed at the open in the morning and shortly thereafter. It is thought that the activity in the afternoon is more influenced by professional traders and institutional investors, trading on the latest news and events.
So strength in the morning followed by weakness in the afternoon is said to be bearish because the professionals are selling into the earlier strength.
But don’t read too much into it. It’s just an observation that seems to have merit but has not been proven.
In any event, yesterday it was again strength in the morning and selling into the strength in the afternoon.
Asian markets closed down last night.
Among individual countries:
Australia closed up 0.3%. China closed down 2.4%. Hong Kong closed down 1.4%. India closed down 0.2%. Indonesia closed down 0.1%. Japan closed down 1.1%. Malaysia closed down 0.2%. Singapore closed down 0.5%. South Korea closed up 0.3%. Taiwan closed up 0.8%.
If you’d like to see a three-month chart of these indexes and others, click here, and then click on any of the markets in the list at the left side of the page it takes you to.
Note; Our data-feed comes in automatically from Reuters and is doubled-checked with the data-feed from eSignal. Often when markets are closed they don’t show that but transmit the data from the last close. That’s why when you watch the tape on CNBC and websites, you often see that a market supposedly closed up or down the previous day, when in fact that market was closed for a holiday. That is why sometimes you see the same thing with our sampling of individual global market closes. It is the data from incoming data-feeds.
Markets this morning.
European markets are down some, on average of about 0.3%.
Oil is down $.19 a barrel at $80.68.
Gold is down $2.80 an ounce at $1,140. Gold is up $24 an ounce, more than 2% so far this week.
Markets in the U.S.
In the U.S., the important economic reports continue to come out. To see the full schedule of this week’s reports click here, and look at the left side of the page it takes you to.
Last week it was that the Conference Board’s Consumer Confidence Index plunged sharply in February; New Home Sales plunged 11% in January; Existing home sales fell 7.2%; Durable Goods Orders ex aircraft orders fell 0.6%; and unemployment claims rose 22,000 last week, the second straight weekly rise. But the revision of 4th quarter GDP to 5.9% GDP growth from 5.7% was a positive, exactly in line with economists’ consensus estimate.
So far this week it has been that consumer incomes rose 0.1% in January, the smallest rise in four months, while spending rose 0.5%, the highest pace since May, 2008. The ISM Mfg index declined to 56.5 in February from 58.4 in January. And Construction Spending fell again in January, down 0.6%. The ADP employment report was that only 20,000 jobs were lost in February, but the last report (for January), which showed only 22,000 jobs were lost in January was revised to a loss of 60,000 jobs. The ISM non-mfg index (services) rose to 53 from 50.5 Any number above 50 indicates expansion, below 50 indicates contraction. The market took yesterday afternoon’s Fed Beige Book as negative as it implied the economic recovery is going to be slow.
I’m sorry, but I have to drive to an important early meeting this morning so I’m putting this up at 8 am. So I don’t have the important early economic reports of this morning. With tomorrow’s jobs report on everyone’s mind, the report on last week’s new unemployment claims, due out at 8:30 am, is likely to be a market mover, since the previous two weeks showed unexpected big increases in claims.
The report on Productivity will also be released at 8:30 am, and the Pending Home Sales report will be released at 10 am, and could also be a market-mover.
At the moment, our pre-open indicators are basically flat, pointing to the Dow being up 5 points or so in the early going.
But that will likely change in one direction or the other when the unemployment claims numbers come out.
Stock Market Patterns.
The current pattern is the ‘Monthly Strength Period’, which was due to begin last Friday and to run through today. Its tendency to be positive is quite persistent in bull markets, not so often in bear markets.
It has not been impressive so far, with one day to go. The Dow is up 21 points or 0.2% over the last five days, and that only because of the 78 point gain on Monday.
Interesting Charts of the Morning.
Lots of confidence and bullishness among options players. The VIX Index (aka the Fear Index), which is based on the activity of options players, rose to a record high of fear and bearishness in late 2008 as the stock market plummeted in its final leg down beginning in the fall of 2008. Fear remained high by previous standards as the new bull market got underway. But for the last several months bullishness and confidence has risen (fear low) to levels seen at the bull market peak in the fall of 2007, and at the tops of the bear market rallies in 2007 and 2008.
Please scroll down to see recent charts and commentaries, especially those of Friday and Saturday.
To read my weekend newspaper column ‘Is the Stock Market Saying the Economy Will Remain Strong?’ click here!
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