Still no confidence that the equity markets are ready to roll over in the long-awaited and overdue correction that even the most bullish are expecting. Last week, the three key indexes were lower on the week and there was a technical reversal on the DJIA, but the NASDAQ, S&P, and broader measures didn’t demonstrate that weakness. After today, the markets will have a lot to work from.
The stock market is rallying this morning, fortified with Xerox’s announced purchase of Affiliated Computer Services for $6.4B. Not important that it’s Xerox or the purchase itself; it is, however, juicing up thoughts that acquisitions and mergers will increase. Mergers and acquisitions are evidence of recovery in the business sector and increasing optimism that the road ahead is paved with opportunity.
Treasuries and mortgages opened fractionally lower this morning after two strong days to end last week, taking the 10 yr to 4 basis points from its key resistance. At 8:30, the 10 yr -2/32, mtgs -2/32, the DJIA futures +20. At 9:00 the 10 unchanged, mtgs -1/32 and the DJIA +27. At 9:30 the DJIA opened +33, the 10 yr +1/32 and mortgages unchanged.
With demand for US Treasuries strong, interest rates are as low now as back in early July. The 10 yr note found very strong support at 3.50%, now trying to test its strong resistance at 3.28%. A full calendar of data this week with employment the key on Friday. Technically, the bond and mortgage markets are bullish, but equity markets still rule.
The Fed will raise its target interest rate for overnight loans between banks by April, based on futures data compiled by Bloomberg. Central bank officials said in a statement last week after leaving borrowing costs unchanged that data indicates “economic activity has picked up following its severe downturn.” Most dealers forecast that yields will remain near current levels into 2010 with consumer prices falling 1.5% from a year earlier and foreign buyers increasing the pace of Treasury purchases as issuance of alternatives (such as so-called agency securities) decrease. It seems that the economic bottom has been achieved, but a recovery isn’t likely to be at the pace that markets and The Street are believing now. The markets aren’t necessarily anticipating increased consumer spending, since consumer spending accounts for most of the growth in GDP. Theoretically, the markets are expecting consumers to return to increased discretionary spending.
Market Minute information for September 28, 2009 provided by:
Patsy Bailey
Mortgage Banker
Plaza Estate Mortgage
4801 Lang Ave NE Suite 100
Albuquerque, NM 87109
4001 Office Court Ste 603
Sante Fe, NM 87507
Cell: 505.715.3231
Office: 505.473.4045 ext.109
E-mail: patsybailey13@gmail.com
For more information on home financing, visit my Albuquerque Mortgage Page.
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