Higher stock market results = higher interest rates.
October 20, 2009
“I never worry about action, but only about inaction” ~ Winston Churchill
Rates ended last week a bit higher from the week before falling in line with the previously reported correlation between higher stock market results = higher interest rates.
The following outlines last week’s economic announcements that fed the stock market higher.
Earning reports were for the most part higher than expectations – these had the most influence:
- Retail sales were up .5% excluding cars (down 1.5% with car sales included - car sales are down 10.4%)
- Business inventories are down to all time lows. This gives less inventory to dump meaning retail prices may finally be stabilizing (this will lead to higher earning opportunities as the market recovers).
- Overall consumer prices are down 1.3% YTD – this month they were up .2% (however this includes fuel prices – as we know gas was up this month).
- Industry production is up to 70.5% = 80% is considered optimal so we are still low – however so are inventories
- Productivity is up significantly during this time of record unemployment – people who still have jobs are working harder to keep them.
Bottom line we may have seen the low in mortgage rates. As reported before the Fed is not increasing the $1.25 Trillion in Mortgage Backed Securities they will purchase – they have simply extended the deadline to spend the current balance to the end of the Q1 2010; which when compared to the past purchase volume is less – this should lead to slightly higher rates (baring a big drop in stocks).
Have a great week –
Subscribe
