The 5 percent (and below!) 30-year mortgage is here. Mortgage rates are dropping on the heels of the Fed's announcement yesterday. Wells Fargo , for example, is listing a 30-year fixed rate conforming mortgage at 4.875 percent this morning!
By comparison, the Mortgage Bankers Association reported that last Friday 30-year fixed rate mortgages fell to 5.18 percent, which was the lowest levels since June 2003, according to the MBA.
The bad news is that while refis are up 250 percent in the past 6 weeks, applications to purchase a home are up only 10 percent. Let's see if news of below-5 percent mortgages makes a difference.
1) Morgan Stanley trading down about 6 percent pre-open as they reported a loss much greater than expected both on the bottom line (loss of $2.24 vs. loss of $0.34 expected) and the top line ($1.83 billion vs. Reuters $4.25 billion).
There is some good news here--they cut the amount of leveraged used from 32.6 to 11.4, so risk has been greatly reduced.
Still, the release is full of what are essentially downsizing announcements:
--closing residential mortgage origination
--cutting principal investments
--resizing the prime brokerage business
--exiting select proprietary trading strategies
Where's the new business coming from? Well, they are beginning a retail banking group.
2) Iron ore producers like Rio Tinto are trading down about 7 percent on a report in the WSJ that two top Australian coking coal mines (used for steel production) are cutting production.
3) CIT down 17 percent on a $250 million secondary offering.
4) ConAgra reported second quarter earnings slightly above expectations and reaffirmed their full year 2009 guidance.
5) General Mills upabout 4 percent on earnings.
6) Adobe up about 9 percenton better earnings.
Did we all read the same Fed statement? I am baffled by comments made by some stock experts that the Fed has used all its bullets by reducing rates essentially to zero. The very purpose of the Fed statement was to make it clear that the Fed had other options besides reducing interest rates, and it would use all of them: "The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity." Get it? They will use other imaginative methods, including more alphabet-soup assistance programs, and if they don't work they will use other methods.
- Paulson: No Plans to Seek the Rest of TARP Fund
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