Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – October 8, 2009

Good News Bad News Article

O.K.-Today I’m going to talk about good news, related to how the market is doing, and then I’m going to accompany that information with the bad news.  The bad news is a statement that somewhat negates the good news statement, and will attempt to explain why the good news…really isn’t very good news.  It’s just not depressing news…so it’s interpreted as good news…here goes…

Alcoa Shows Profit

Good News – Aluminum Giant, Alcoa, reported profits for the 3rd Quarter, unexpectedly.  I have been discussing how interest rates should be lower, in October, as earnings statistics show that companies are unable to show any profitability.  Well, Alcoa was able to show a profit, and Stocks reacted positively.

Bad News – Alcoa cut 34,000 jobs, this year, to reach that profitability.  One-third of its work force.  So, while we expected to see this hit their books in the 3rd Quarter Earnings Report, we were surprised that they were still able to show a profit.  So, they can only cut so many jobs, before productivity reaches a turning point.  So, I think the markets will start to understand this, however, currently Stocks are enjoying the news.

Initial Jobless Claims

Good News – Initial Jobless Claims were expected to chime in at 540,000 new claims.  Only 521,000 applications for unemployment benefits were submitted.  This is the lowest amount of claims since January.

Bad News – Initial Jobless Claims were expected to chime in at 540,000 new claims.  Only 521,000 applications for unemployment benefits were submitted.  Over 1/2 million people, claiming new unemployment benefits, isn’t exactly the cheeriest news I’ve heard in a while.  But, the market’s all gitty about it.  We’ll see for how long.

Now THIS Is Interesting

The 10-Year Treasury Auction fared quite well yesterday, and the 3-Year Treasury Auction didn’t do so well, the day before.  Surprised?  Somewhat.  Generally, a longer term investment is more difficult to auction off, however, things are a-changin’.  The 30-Year Treasury Auction is today.  It will be interesting to see how this auction fares, with the value of the dollar moving lower, as of late.

I’d Buy That For A Dollar

A line from the movie, “RoboCop.”  Wonder what it would have bought then, compared to what it can buy today!  With the value of the dollar plummeting into the toilet, our exports are cheaper to move, worldwide, which can help our economy.  A lower dollar can be inflationary, however, at these times, we’re trying to avoid deflation!  So, this makes our bonds desirable to foreign markets, because their currency is worth more than ours.  So, they can buy at a discount.  We have enormous debt to pay off, and with foreign interest in our Bonds, we could benefit earlier.

Overseas Rates

The Bank of England and The European Central Bank, both, left their overnight rates unchanged.  But, if they move their rates up before we move our rates up, then it could put more pressure on long term rates by higher oil prices.  With things changing so rapidly, it’s important to stay on top of the market for clients.

Float Into The Day

With the 30-Year Treasury Auction, and 3rd Quarter Earnings Reports trickling out, again, let’s keep a finger on the lock button, but hold off, unless things change.  See you tomorrow!

Related Must Reads

Read About 3rd Quarter Earnings
How Long Term Bond Investments Work
Where’s Interest?…In Bonds…June 3, 2008 Article About Foreign Appetite

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This entry was posted on Thursday, October 8th, 2009 at 8:13 am and is filed under Chico Home Loans, Home Buying, Interest Rates, Weekly Market Report. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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