February 1st, 2012 9:27 AM by Mel Samick
Last week, more quarterly earnings releases, the FOMC meeting, mixed economic indicators and the Fed's economic forecast were on investors' radars. Mixed earnings and mixed economic indicators kept investors on their toes throughout the week. In the absence of any major economic news in the first half of the week, trading was on the slow side; however things started picking up from the FOMC meeting outcome. The Fed decided to extend the low Fed rate policy until the end of 2014 from mid-2013 and also hinted at additional quantitative easing. The rest of the FOMC statement was the same as that of the last meeting. The Fed for the first time released, in its forecasts, a projection for the Fed Funds Rate and timing for when the next rate move is to be expected. The recent average forecast for the rate at the end of 2014 is a little over 1 percent. The Fed also lowered its forecasts for GDP growth, the unemployment rate, and inflation. Unexpectedly, at the same time as the release of these forecasts, the Fed essentially announced a long-run inflation target of 2 percent.
All major indices ended up in positive territory, with the exception of the Dow which ended slightly lower than the neutral line. The S&P closed at 1,315 while the Dow ended the trading week at 12,720. In major economic indicators released last week, and beating market expectations, Durable Goods Orders for December rose by 3 percent; excluding Auto Goods, orders were up by 2 percent. For the month of January, Consumer Sentiment came in higher than market expectations. Also, the Leading Indicators Index jumped up in December. However, fourth quarter economic growth disappointed investors with 2.8 percent GDP compared to the expected 3.2 percent. In the earnings sector, Netflix and Caterpillar surprised most market watchers. Netflix published growth in its subscriber base, while Caterpillar announced a great quarter and bullish demand guidance for 2012. However, P&G and Chevron earnings releases disappointed investors.
The 10-year Treasury yield was down 17 basis points and ended the week at 1.90 percent. Towing the same line, mortgage rates were also down last week. At the end of the week the Conforming Fixed 30-year rate leveled out at around 3.69 percent, while the Conforming Fixed 15-year rate finished at around 2.93 percent. Standard 5/1 ARM rates were last seen hovering at around 2.86 percent. Even with these declining and persistently low rates, the housing market is still in somewhat of a slump. For the month of December both New Home Sales and Pending Home Sales were on a downward trajectory.
Information provided by NYCB Capital Markets