July 7th, 2009 12:58 PM by Mel Samick
While America celebrated it's 233rd year as a sovereign nation this week, investors were struggling with the worst recession since 1930. The market lost some of its gains from the past couple of weeks, which proves that investor confidence is slowly slipping. However, investors are still looking at corporate earnings to get some insight about a potential recovery.
Investors were still looking for some good economic indicators during the holiday--shortened week in hopes of some signs that the economy is stabilizing. Unfortunately, the low consumer sentiment index and a poor labor department report provided a reality check that the economic recovery is still a long way off. The market had an exceptional second quarter, as the Standard & Poor's 500 index gained nearly 40 percent-its best gain over such a period in the last 10 years. All major indexes continued their downward trend for the third week, with the Dow ending 1.9 percent down from the past week while the S&P 500 and NASDAQ were down by nearly 2 percent.
The Conference Board's measure of Consumer Confidence was down to 49.3 for the month of June after having an unusual upward jump in the month of May, giving an ample indication to investors that things are not going as good as they seem. Adding to investor woes, the unemployment rate reached 9.5 percent, an increase of .1 percent from last month. The employment rolls took a turn for the worst in June, losing 467,000 jobs this month, compared to 322,000 in May. However, the severity of job loss has lessened in the last couple of months, as initial jobless claims came down to 614,000 from 675,000 (end of first quarter). Also, factory activity experienced some stability, as The Institute of Supply Management's national survey for June produced a decent reading of 44.8.
With no indications of new support from the Fed or the Treasury, the struggling housing market has still not shown any meaningful signs of recovery. However, the Obama administration has expanded the refinance program to home-owners who owe more money than their current home value. Under this updated program, Fannie and Freddie will refinance up to 125 percent loan to value, an increase from a previous 105 percent. This past week, 30 year Conforming Fixed mortgage interest rates were stable around 5.4 percent, as the 10 year Treasury moved downwards to 3.5 percent. As per the Mortgage Bankers Association, for the week ending Jun 26, 2009, mortgage application volume was down by nearly 18 percent, while refinances were down by 30 percent from the previous week.
The coming week will keep investors busy with economic indicators giving a much clearer picture of economic health. Important numbers to be released this week include the Trade Balance, Import price index and Consumer confidence on Wednesday, the monthly budget statement on Thursday, and the Producer Price index and Retail sales on Friday.
Information provided by Amtrust Bank Capital Markets