Stocks are under some selling pressure this morning.
Merrill Lynch, the country's largest investment banker and broker, reported a far more massive 3rd quarter loss. The entire Stock market is trading lower on this news, and this is helping Bond prices improve.
Existing Home Sales for September came in pretty ugly, underscoring the problems created by a tightening mortgage market. Unsold inventory spiked to a 10 1/2 month supply, and the median home price dropped to $211,000. The biggest problem areas were California and Florida as they also enjoyed some of the largest gains in recent years. Much like the last housing decline in the early 90's, a recovery will likely be measured in years, not months.
At 1pm ET, the US Treasury is going to auction $20 Billion in Two-year Notes. It will be interesting to see how well the auction is received by domestic and foreign investors. With the chances of a Fed Funds Rate cut next week looking good, today's auction should go well as investors try to lock in higher yields ahead of the Fed's next move - and a successful auction should support Bond prices this afternoon.
Bonds are now hovering near the best levels of 2007. This morning's gap higher shows continued buying pressure and this is a positive for Bonds. We recommend to float for now and prepare to take advantage of these lower rates in the near future.
My best wishes go to the tens of thousands displaced families fair well through these difficult times during the fires in California. Also, that the firefighters are efforts effective and they return uninjured.
Thank you for listening and we will have another report for you tomorrow.
Roger Herrick
California Mortgage Broker
www.ContactHerrick.com
;)
;)
