There were several key economic developments that happened last week – here are some highlights.
On Thursday, the Securities and Exchange Commission’s (SEC) Chief Accountant, the Financial Accounting Standards Board’s (FASB) Chairman and the Deputy Comptroller for Regulatory Policy in the Treasury Department testified in front of the House Financial Services committee on the “Mark-to-Market” accounting rule. This rule was created so that there would be more transparency in business dealings, but fell prey to the law of “unintended consequences“, and has played a major part in our current financial crisis. If you’ve been reading this Pasadena real estate blog for awhile, you know this has been discussed several times – and we’ve even sent you a great explanatory video that breaks down what it all means, and why it has been such a major issue.
READ MORE: Mark to Market explanation
Because so many of you have been asking about this topic and great video – I am including the information and Mark to Market video once again in this week’s issue – keep reading for the full scoop in the Mortgage Market View article below.
During Thursday’s hearing, Congress demanded an answer for repairing this situation within the next three weeks, so right now, it looks like we will see some sort of coordinated action by both the FASB and the SEC to address the Mark-to-Market situation soon. Stocks certainly reacted positively to this news last week, as well as to Citigroup’s announcement that it will not need more TARP money from the government. Stocks also liked the remarks from Federal Reserve Chairman Bernanke that the recession would be over by year-end if the banking situation is stabilized, and that major financial institutions would not be allowed to fail.
In other news, the Retail Sales numbers for February came in better than expected and the numbers for January were revised higher. This report is very volatile from month to month, but the last couple of readings have been encouraging. However, the job market continues to struggle as the number of people receiving unemployment reached a record 5.32 Million. And there was news that China is concerned the US may be spending too aggressively on the recession, which could lead to inflation down the road that would diminish the value of Bonds and China’s investments in the US.
Overall, Bonds and Pasadena home loan rates didn’t worsen last week – even with the huge Stock rally – and ended the week relatively close to where they began.
Economic forecast for this week:
The middle of this week will be action packed with both scheduled economic reports and the Fed’s next regularly scheduled meeting, including their policy statement and rate decision being delivered on Wednesday. With all the actions the government has been taking to stabilize our economy, it will be especially important to hear what the Fed has to say.and to see how the markets react.
This week also brings news on the inflation (or deflation) front, with Tuesday’s wholesale measuring Producer Price Index (PPI) Report and Wednesday’s Consumer Price Index (CPI) Report. Given China’s concerns mentioned above about US spending to combat the recession and what that could mean for inflation, it will be important to see how these reports come in.
Also this week, we’ll get a read on the new construction housing market with Tuesday’s Housing Starts and Building Permits Reports. On Thursday, the Philadelphia Fed Report will be released. This monthly survey of manufacturing purchasing managers conducting business around the tri-state area of Pennsylvania, New Jersey, and Delaware is one of the most-watched manufacturing reports. We’ll also have another Initial Jobless Claims report on Thursday, and with the number of people collecting unemployment reaching record highs as mentioned above, it will be important to keep an eye on this report, too.
Remember: Weak economic news normally helps Bonds and Pasadena home loan rates improve, as money flows out of Stocks and into Bonds.