The major indices closed with the first 3-day win streak since September 10-12. While commodity stocks and financials led, and tech stocks lagged, the real star of the day was the home builders, several of which increased 20 percent or more.
That's because the new program announced by the Fed to buy Mortgage-Backed Securities appears to have accomplished its goal: lower mortgage rates.
I spoke to one large mortgage broker in Philadelphia this afternoon, who said they were now quoting 30-year fixed rate mortgages at 5.5 percent, a drop of a half-point from yesterday's 6.0 percent. That is a big drop.
This office told me they had closed 100 loans today (a much larger number than any time recently); much of it was refinancings.
Many consumer stocks like Lowe's , Target , and Whirlpool were up today as Treasury also announced a separate Term Asset-Backed Loan Facility (TALF) that will buy pools of car loans, personal loans, and student loans.
Finally, Goldman Sachs ended up almost 7 percent as its $5 billion bond offering was a big success. Why? Because it had the explicit backing of the U.S. government!
Goldman became the first firm to tap the FDIC's Temporary Liquidity Guarantee Program, which guarantees senior unsecured debt. That has enabled Goldman to offer the bonds at 3.25 percent, well below the yield they would have had to offer had there been no explicit government guarantee. JP Morgan and Morgan Stanley will follow up with similar offers.
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