Mel's Blog

September 19,2011 Market News

September 19th, 2011 11:57 AM by Mel Samick

Eight weeks ago, a labor dispute threatened to push the NFL season to the sidelines. Instead, the goliaths of gridiron made a glorious return over a week ago. The games also paused to mark the 10th anniversary of the Sept. 11th attacks. In an emotionally charged game in New York last Sunday night, the Jets won due to a costly turnover from Dallas quarterback Tony Romo. That's the risk you take with Tony Romo; that he's going to touch the ball and try to do things with it. Though the season is just two week old, fans across the globe are hoping their teams will play in the grand finale next February 5th, to be held for the first time in Indianapolis. I'm not one of those hopeful home team fans. In other terrible news, rumors are flying that power-couple Alex Rodriguez and Cameron Diaz have split up. The two stars both want to focus on their careers, a source told the New York Post. This comes as a relief because now Diaz can work on creating more gems like "What Happens in Vegas."

Consumer sentiment inched up in early September, but Americans remained gloomy about the future with the gauge of expectations falling to the lowest level since 1980, a survey released last Friday showed. The Thomson Reuters/University of Michigan's preliminary reading on the overall index on Consumer Sentiment edged up to 57.8 from 55.7 the month before, which had been the lowest level since November 2008. Consumers have become increasingly pessimistic about the strength of the recovery this year amid worries that the U.S. economy could fall back into recession. The textbook definition of a recession is a downturn in economic activity, characterized by at least two consecutive quarters of decline in a country's gross domestic product (GDP). Translation? A big drop in consumer spending ending in a loss of jobs, personal income and business profits. Sound familiar? Can things get any worse? If the economic slowdown deepens and goes on for a long period of time, it can become a depression. Harry Truman, the 33rd president, is credited with saying, "A recession is when your neighbor loses his job. A depression is when you lose yours."

In related news, the ranks of the nation's poor have swelled to a record 46.2 million -- nearly 1 in 6 Americans -- as the prolonged pain of the recession leaves millions still struggling and out of work. And the number without health insurance has reached 49.9 million, the most in over two decades. For last year, the official poverty level was set at an annual income of $22,314 for a family of four.

Fixed mortgage rates fell to the lowest level in six decades for the second straight week. But few Americans can take advantage of the historically low rates. Freddie Mac said Thursday that the average rate on the 30-year fixed mortgage fell to 4.09 percent this week, down from 4.12 percent. That's the lowest rate seen since 1951. The average rate on the 15-year mortgage, a popular refinancing option, fell to 3.30 percent from 3.33 percent. Economists say it is likely the lowest rate on the 15-year ever. Mortgage rates tend to track the yield on the 10-year Treasury note. Worries over Europe's debt crisis are pushing investors to shift money into safe haven Treasury's, forcing the yield lower. Still, cheap mortgage rates haven't helped home sales. Sales of new homes are on pace for the worst year on record dating back a half-century. The pace of re-sales is shaping up to be the worst in 14 years. Many Americans are in no position to buy or refinance. High unemployment, scant wage gains and large debt-loads have kept them away. Others can't qualify. Banks are insisting on higher credit scores and 20 percent down-payments for first-time buyers. Some homeowners have too little equity in their homes to meet loan requirements. The average rate on a five-year adjustable-rate mortgage rose to 2.99 percent. That's higher than last week's 2.96 percent, the lowest record dating back to January 2005 and the sixth straight week of record lows for this type of loan.

An economy under constant barrage from housing, price inflation, and debt concerns actually has created investment opportunities, banking analyst Meredith Whitney said. Though she's more widely known for strongly bearish positions, Whitney said the beat-down of asset prices is working in investors' favor. Wall Street made it a clean sweep, overcoming a round of weak economic reports, particularly on job creation, manufacturing and consumer confidence, as well as wrangling over how best to get Europe out of its sovereign debt mess, to finish positive every day last week. The stock market had its second-best week in a year. The Standard & Poor's 500 gained 5 percent, with the market enjoying its first five-day winning streak since July. It was the best week for the Nasdaq since July of 2009, up 6.7 percent last week. The Dow finished the week up 4.7 percent, closing at 11,509.

Mel Samick

Information provided by NYCB Capital Markets

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Posted by Mel Samick on September 19th, 2011 11:57 AM

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