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Wednesday, December 9, 2009

Morning Market Report

Markets took a big hit yesterday with the Dow down over one hundred points and hitting below 10300 once again. Both the NASDAQ and the S&P were also down more than .75 percent as well. This morning futures are a bit higher. Each is up .25% and less. Yesterday, the credit rating agency Moody's warned the U.S. that if the country's finances weren't straightened out soon, the country's AAA rating may have to be cut.

This news came up in the spring. In fact, it was caused by a similar warning to the British government by Moody's. That lead to sustained weakness in bonds. So far, there's been a collective shrug in bonds. The ten year U.S. treasury bond is actually just slightly better it's now trading at 3.38% after having a great Monday. The yield spread between the two and ten year has increased and is now at 2.66%. That's about as high as it's been in months. Meanwhile, the three month T bill is pushing zero again and is now trading at .02% yield. Oil is currently up about 70 cents a barrel to $73.34. That's up on the day though down over the last week. Meanwhile, gold is relatively unchanged this morning. It's at $1146.09 an ounce. That's up $2.70 an ounce. Gold is down over the last week and a half about $60 an ounce.

Markets in the Far East were generally down. The NIKKEI in Japan was down 1.33%, the Hang Seng in China was down 1.44% and the broader Chinese index was down 1.73%. In Europe, it was largely the same. The FTSE in London is now down .15% and the DAX in Germany was down .51%.

Things are relatively quiet in currencies. The dollar is up .13% against the Euro, down .14% against the British pound and down .38% against the Yen. In the intermediate, the inverse relationship between the dollar and equities continues.

The dollar-stocks inverse correlation appeared to be in full effect. The dollar index was off 0.5 percent in early trading, sending stock futures higher and oil prices back over $73 a barrel. Gold, though, was slightly in the red.

The dollar asset bubble continues to form. Finally, mortgage applications hit a two month high last week as mortgage interest rates approached record levels.

Demand for U.S. home loans rose to the highest level in about two months, mainly from borrowers locking in low mortgage rates by refinancing, the Mortgage Bankers Association said on Wednesday.

Nearly three of every four loan requests last week was for a refinancing, the industry group said.

Before everyone breaks out in a fit of euphoria, the key to that number is the final sentence. Mostly, these are being taken advantage of in the refinancing area. This has certainly helped property sales but the low rates have created a mini refi boom.

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