Market Vs. FED
Stocks moved sideways today, as did the Dollar.
Bonds started a rally today with decreasing interest rates. This was caused by a successful auction of new Treasury Notes, and this satisfied the fears expressed last week on a great new supply of Treasuries being issued.
Gold fell below $910, so let’s wait to open that bottle of champagne. Let’s let it rally again, as it undoubtedly will.
Oil and gasoline fell a lot today on fears for the US economy. The news today wasn’t so bad as to drive oil prices down without driving stock prices down. This just means that the oil market is still being manipulated, so watch out for a high volatility energy price market.
In the news today….
Consumer Confidence hit an ALL TIME low for January. The public is worried about their jobs, home values and retirement funds disappearing. And, all these worries are real. This means the consumer, or 2/3 of the GDP of the US, is going to spend less money each day as it shops. The result is predictable – the recession will just get worse. Sorry for the bad news, but that’s what people are doing and saying.
The FEDs want mortgage rates to stay low. Why??? Because it will help stop the bleeding in the US housing market by encouraging more home purchases by using low interest rate loans. This is one of those “tools” that the FED can use – or can encourage it – by keeping interest rates low. However, they have one big problem. Mortgage rates are related to long term Treasury Bonds, and long term Treasuries have been on a rampage in increasing interest rates – and subsequently driving mortgage rates up. The Treasuries market is a battle between the FEDs (who want low rates, and threaten to purchase Treasuries themselves to keep rates low) and the general market players (who want as much interest as they can get, and really worry about inflation) – and the market players are currently winning – because the FEDs haven’t bought one bond yet. This will be an interesting battle to watch as it directly affects us all – as Treasury interest rates affect lots of related interest rates like credit cards, bank loan rates, corporate bond rates, etc.
Here are Today’s numbers:
Dow Jones 30 Industrial – 8175 (up 59 points)
10 Year Treasury Bond – 2.52% (down 0.12%)
Euro – $1.3189
Gold – $901 (down $9)
Oil – $41.58 (down $4.25)
Gasoline – $1.11 (down $0.04)