Market Update (June 18 – 25): Spanish debt, falling gas prices, national Real Estate numbers
The Dow fell over 150 points to begin the trading week. European debt issues in particular weighed on the market, and the increasing likelihood Spain will default on its debt due to unsustainable borrowing costs. The 10-year bond yield fell from 1.67 percent to 1.60 percent. Mortgage rates are flat and remain at the price levels we saw last week.
The Wall Street Journal reported this morning that gas prices declined for their 11th straight week. The average price of gas is now 3.53 a gallon. Typically, gas prices can act as a small kind of stimulus to consumers, as lower costs free up spending possibilities in other places. However, stagnant retail sales shows that consumers are not necessarily spending more and tentative consumer confidence numbers reflect a public that is still wary about the U.S. economy.
Weekly jobless claims rose last week, and unemployment ticked up 0.1 to 8.2 percent. Consumer sentiment is closely attached to movement in the job market, and this may be why retail sales have dipped.
National real estate numbers for April and May were released by the handful last week.
- - Housing starts fell 4.8 percent in May, but housing permits rose 7.9 percent.
- - Home prices rose 7.9 percent in May over the previous year.
- - May existing home sales rose 9.6 from 2011, but declined 1.5 percent from the previous month.
- - May new home sales rose 7.6 percent and a 19.8 percent year-over-year.
Lastly, we should mention that last Wednesday (June 20), The Federal Open Market Committee (FOMC) voted to extend “Operation Twist” through the end of the year, citing the need for continued support of the U.S. economy and concern over Europe’s debt situation. The stimulus program involves the Fed selling short-term bonds (with maturities of three years or less) and purchasing long-term securities (with maturities of six years or more) to promote a long-term low-interest rate environment. The program was extended by $267 billion.