December 30th, 2009 11:03 AM by Mel Samick
This year the economy has performed beyond the wildest expectations of many economists. Who would have predicted that the Dow would be currently sitting well above 10,500 during its nadir of 6,500 during the Ides of March? One wonders if the market pundits paid a little heed to the soothsayer's warning to Julius Caesar, "Beware the Ides of March," that has forever imbued that date with a sense of foreboding. The turnaround (or maybe a semblance of it) has been quite impressive. Home sales rose by a stout 10.1 percent in November to a 6.54 million annualized rate of sale - easily the best pace in some time. With firming home prices and recovering retirement and personal wealth tied to stocks, many investors breathed a sigh of relief and more than a few million consumers are already reaching for their wallets and heading into the malls.
The stock market witnessed an upward move in a holiday-shortened week. All major indices ended in positive territory, gaining around 0.5 percent. The S&P 500 index rose 66.5 percent since hitting 12-year lows in March. The Dow Jones Industrial Average rose 53.66, to 10,520.10. The weak U.S. dollar was a major factor in terms of maintaining the index’s strong showing, as energy and material sectors were leading the stock markets. Also, a more positive employment report contributed to the increase in orders of durable goods for November, helping investors to be more optimistic for an improving U.S. economy.
In another sign of economic recovery, November wages increased by .3 percent, resulting in a jump of .4% and .5% in personal savings and spending, respectively. Savings remained steady at 4.7%. The employment report was like a Christmas carol to investor’s ears: Initial jobless claims surprised everyone, falling by 28,000, which the Labor Department describes as a part of "a long-term trend" of improvement.
In another move to boost the housing market amid rising rates, the U.S. Treasury removed the $400 billion cap from the troubled GSEs, Fannie Mae and Freddie Mac, allowing them to have enough buffer based on projected losses over the next three years to honor securities they sold to investors. Mortgage rates continued moving upwards during this past week after coming in lower in November; the Conforming Fixed 30-year rate topped out at around 5.2% while the Conforming Fixed 15-year rate was last seen at around 4.5%. Standard 5/1 ARM rates were hovering around 4.25%.
Information provided by Amtrust Bank Capital Markets