Whats up with rates and the markets

Let’s hope that potential home buyers aren’t keeping their down payment monies in the stock market! This morning stock futures are down their limit. At some point it seems that money managers enjoy pushing a certain market one way or the other, and this time it is stocks to the downside. Asian markets were mauled overnight – with the stock markets in most countries losing about 10% on fears of a global recession. Hong Kong, Australia, Singapore and Taiwan markets dropped to their lowest levels in at least three years. Japan’s Nikkei was down 9.6% to end at 7,649, the lowest its been in 5 ½ years. Their stock market is at one fifth (as in 1/5) of its all-time high of 38,915, which it hit in December 1989.

 

The stock prices of banks are being hit hard so far. Bank of America’s are -9% to $20.90, Citi -10% to $11.85, Goldman Sachs -12% to $95.65, JPMorgan Chase -8% to $34.90, Merrill Lynch -12% to $15.35, Morgan Stanley -14% to $15.53, Wachovia -9% to $5.26, and Wells Fargo -8% to $28.90.

 

But hey, it costs you less money to fill up every week, so all is not bleak. Oil is down another $4 to $63. The Organization of Petroleum Exporting Countries (made up of 11 countries) cut oil production targets by 1.5 million barrels per day for the first time in almost two years to stem a collapse in prices, down from their current 28.8 million barrels a day. Thankfully for Hummer owners, oil has dropped 57% since mid-July when we were seeing $147 a barrel.

 

What is all this doing to interest rates? 10-yr notes from the Treasury were up earlier 1.25 in price, with the yield down to 3.49%, and the 2-yr was down to 1.36%. Things are not that good now, however, with the 10-yr back “up” to 3.54%. But mortgage prices are not along for the ride. Yesterday mortgage prices held in during the morning, but then faded during the day, and several investors changed prices for the worse as our stock market rallied. This morning mortgage prices are actually worse by .375 to .5 in price from yesterday afternoon. The only scheduled economic news is September’s Existing Home Sales, expected +.8%, but really, is anyone going to be waiting for that number?

Thanks again Rob for your valuable info