Market News - Weekly Wrap-up - 01.11.08

More negative news this week on the economic front prompts more analysts to predict a recession in 2008.  Bank of America announced it will rescue Countrywide Financial, the nation’s biggest mortgage lender, in a stock deal for $4.1 billion.

Market and Economic Recap

Business Week Ending January 11, 2008

News from the Commerce Department

• Up>–U.S. Trade Deficit: The trade deficit, the gap between imports and exports, jumped by over 9%, a much larger increase than had been expected.  Record foreign crude oil prices drove the increase, as the country’s bill for foreign oil climbed to an all-time high of $34.4 billion.  U.S. Exports also set a record, rising by 0.4%, but the good news is overshadowed by a 3% increase in total imports of goods and services.  With the weaker dollar, demand for exports has grown, providing a boost for U.S. manufacturers and farmers. 

News from the Labor Department

• No inflation. Import prices remain unchanged for December.

The Stock Market

Stocks fell as investor’s fears rose about growing losses in the financial sector, and more major players prepare to announce they will take a big hit from the subprime mortgage debacle.  Merrill Lynch & Co, the nation’s largest brokerage, is expected to suffer around $15 billion in losses from mortgage debt, according to the New York Times, and is currently seeking investors to infuse capital and offset its losses.   Merrill, along with Citigroup Inc. and JPMorgan Chase & Co. will report results later next week.

Gold Rush

Gold futures spiked to their highest level ever this week, pushed higher by the weak U.S. dollar and rise in oil prices.  Gold is once again seen as a safe bet for investors in these times of political and economic insecurity.  The closing price for February delivery topped $880 an ounce, up from $878.00 last month.

Consumer Confidence

Problems in the housing and credit industries is wearing on consumer confidence.  According to the RBC Cash Index, the confidence index dropped to an all-time low of 56.3 in early January from a reading of 65.9 in December.  Consumers are concerned about jobs, energy bills and home foreclosures impacting the health of the economy, as well as their own financial security.

The Fed Will Cut Rates Again

Federal Reserve chair Ben Bernanke himself made it clear that he intends to slash interest rates again as needed to prevent the housing and credit crisis from sending the economy into a downward spiral.  With Bernanke being so upfront about his intentions, may analysts expect the Fed will make a bold move when it meets at the end of the month, possibly slicing another one-half  percentage point off its key interest rate. 

When asked directly about the state of the economy, Bernanke said, “The Federal Reserve is not forecasting a recession.”  But they feel the economy will experience ”slow growth.” 

Stay tuned for more news on the economy, mortgages, and the new homes real estate industry.

If you're new here, you may want to subscribe to our RSS feed.

If you would like to receive email updates to our blog, you may Subscribe to New Homes Real Estate Blog by Email

Thanks for visiting!