January 19th, 2012 9:20 AM by Mel Samick
Stocks bounced off their lows last Friday, but still ended in negative territory amid expectations of an imminent S&P ratings downgrade of several Euro zone countries. Despite the day's losses, stocks still posted a gain for the week. The Dow Jones industrial average finished at 12,422, up 0.5 percent for the week. The Standard & Poor's 500 Index finished at 1,289, advancing 0.9 percent while the NASDAQ Composite Index finished at 2,710, gaining 1.4 percent for the week. With stocks off their worst levels, some experts said the move implies that U.S. equities may have already priced in the negative news or are in the process of decoupling from Europe. It seems as if we are seeing the U.S. market being a lot less reactive to Europe and a lot more focused domestically. On the economic front, Consumer Sentiment reached 74.0 in its preliminary January reading, soaring to the highest level since May, according to the University of Michigan's Consumer Sentiment Index.
Standard & Poor's credit rating downgrades of nine Euro zone countries will fuel attempts by European Union lawmakers to slap stricter curbs on sovereign ratings. European shares and the Euro currency gradually recovered on Monday from early losses triggered by the mass downgrade of Euro zone sovereign ratings last week, but they still looked vulnerable amid rising fears of a disorderly Greek debt default. Markets had already reacted to the downgrades on Friday, and European assets steadied by Monday afternoon, but activity was limited with U.S. markets closed and the problems in the region's debt markets continuing to weigh on sentiment.
What's happening with the housing market? Rates for 30-year U.S. mortgages fell to the lowest level on record after Federal Reserve Chairman Ben Bernanke urged lawmakers to do more to revive housing. Bernanke, in a 26-page report to Congress last week, called the weakness in the property market a "significant barrier" to U.S. economic health and outlined possible ways to clear the glut of foreclosed properties, protect homeowners from default and help borrowers take advantage of low borrowing costs. The average rate for a 30-year fixed loan decreased to 3.89 percent in the week ended last Friday, the lowest on record dating to 1971, from 3.91 percent, Freddie Mac said in a statement. The average 15-year rate dropped to 3.16 percent from 3.23 percent. New Home Sales jumped to a seven-month high in November, according to Commerce Department figures released on December 23rd. Sales of Existing Homes rose in November to a 10-month high, according to the National Association of Realtors. . Home-loan applications climbed 4.5 percent in the period ended January 6th, according to a Mortgage Bankers Association index. The Washington-based group's measure of purchases rose 8.1 percent from a three-month low, while its refinancing index increased 3.3 percent.
The financial news should be light in the early part of this holiday shortened week. On Thursday we will receive data on CPI, Housing Starts, Jobless Claims as well as earnings from BofA, Google, and Microsoft. On Friday we will receive earnings data from GE.
Information Provided by NYCB Capital Markets