There is nothing like a week away in Puerto Rico to make a person forget about all the problems of the world. For just one week, it didn’t matter what the stock market was doing or whether Europe had solved its financial crisis. Who knew I’d be safer zip lining “The Beast”, at Toro Verde than being on a cruise ship. Flying ‘superman’ style on a 4,700 foot long zip line at 850 feet up was a thrill. The passengers of Costa Concordia experienced their own adventure. Last week the Costa Concordia cruise ship struck rocks off of Italy’s Giglio Island and turned over on its side and began to sink. The ensuing disorder and incompetence of the crew led to much confusion. Tragically, the death toll is at 11 while 24 passengers remain missing. On a much lighter note, I am happy to be back stateside just in time for the best and worst dressed at the Golden Globes.

Stocks bounced off their lows last Friday, but still ended in negative territory amid expectations of an imminent S&P ratings downgrade of several Euro zone countries. Despite the day’s losses, stocks still posted a gain for the week. The Dow Jones industrial average finished at 12,422, up 0.5 percent for the week. The Standard & Poor’s 500 Index finished at 1,289, advancing 0.9 percent while the NASDAQ Composite Index finished at 2,710, gaining 1.4 percent for the week. With stocks off their worst levels, some experts said the move implies that U.S. equities may have already priced in the negative news or are in the process of decoupling from Europe. It seems as if we are seeing the U.S. market being a lot less reactive to Europe and a lot more focused domestically. On the economic front, Consumer Sentiment reached 74.0 in its preliminary January reading, soaring to the highest level since May, according to the University of Michigan’s Consumer Sentiment Index.

Standard & Poor’s credit rating downgrades of nine Euro zone countries will fuel attempts by European Union lawmakers to slap stricter curbs on sovereign ratings. European shares and the Euro currency gradually recovered on Monday from early losses triggered by the mass downgrade of Euro zone sovereign ratings last week, but they still looked vulnerable amid rising fears of a disorderly Greek debt default. Markets had already reacted to the downgrades on Friday, and European assets steadied by Monday afternoon, but activity was limited with U.S. markets closed and the problems in the region’s debt markets continuing to weigh on sentiment.

What’s happening with the housing market? Rates for 30-year U.S. mortgages fell to the lowest level on record after Federal Reserve Chairman Ben Bernanke urged lawmakers to do more to revive housing. Bernanke, in a 26-page report to Congress last week, called the weakness in the property market a “significant barrier” to U.S. economic health and outlined possible ways to clear the glut of foreclosed properties, protect homeowners from default and help borrowers take advantage of low borrowing costs. The average rate for a 30-year fixed loan decreased to 3.89 percent in the week ended last Friday, the lowest on record dating to 1971, from 3.91 percent, Freddie Mac said in a statement. The average 15-year rate dropped to 3.16 percent from 3.23 percent. New Home Sales jumped to a seven-month high in November, according to Commerce Department figures released on December 23rd. Sales of Existing Homes rose in November to a 10-month high, according to the National Association of Realtors. . Home-loan applications climbed 4.5 percent in the period ended January 6th, according to a Mortgage Bankers Association index. The Washington-based group’s measure of purchases rose 8.1 percent from a three-month low, while its refinancing index increased 3.3 percent.

The financial news should be light in the early part of this holiday shortened week. On Thursday we will receive data on CPI, Housing Starts, Jobless Claims as well as earnings from BofA, Google, and Microsoft. On Friday we will receive earnings data from GE.

Thank you for your business and have a great weekend!

ABBA First Mortgage, Inc. will be closing early on Friday, December 23rd at 12pm in observance of Christmas. We will resume normal business hours on Tuesday, December 27th.

We look forward to serving all of your mortgage needs… Merry Christmas!

Last week there was news of better coordination among all Euro zone countries at the Euro Summit. That, along with mixed domestic indicators kept the stock market rolling along. Investors took a cue from the summit, where all Euro members committed to working on reducing costs and implementing tighter fiscal controls. Equities were on a buying spree with the hope that the economy will improve because of Europe’s efforts to fix its precarious financial and economic conditions, while cooler inflation in China could mean that the country can curb inflation without sacrificing economic growth.

All major indices last week were up by nearly one percent. The S&P closed at 1,255 while the Dow ended the trading week at 12,184. In domestic indicators, October sales were up while Inventory levels also rose to 1.6 percent for the same month. Consumer borrowing also rose for the month of October mainly due to Auto and Student loans. Per the University of Michigan, Consumer Sentiment is due to rise in the month of December. The Trade Imbalance for the month of October shrunk as imports slipped by $2.3 billion due to lower oil prices during that period. On the flip side, declining economic conditions with our trading partners took a toll on factory orders as they fell in October after being flat for the past three months. On the employment front, Jobless Claims came in again at the under 400 thousand mark in the first week of December.

The Ten year treasury yield ended flat at 2.05 percent. Towing the same line, mortgage rates were also flat last week. At the end of the week, the Conforming Fixed 30-year rate leveled out at around 3.75 percent, while the Conforming Fixed 15-year rate finished at around 3.25 percent. Standard 5/1 ARM rates were last seen hovering at around 2.84 percent.

This week, investors will be focusing on the Euro zone development for solving the European debt crisis. In other major economic indicators, the Fed is expected to keep interest rates unchanged as part of the FOMC meeting announcement on Tuesday. Import and Export Prices on Wednesday and the Producer Price Index on Thursday and the Consumer Price Index on Friday will be of interest.

Good, old times… we used to talk about Europe in the context of a splendid vacation, beautiful architecture, fashion designers and other pleasures of this world. Nowadays, the European debt crisis is the prime focus of investors’ attention around the world. On Wednesday, the global markets cheered the joint decision of the European Central Bank, Federal Reserve, the Bank of England and the Central banks of Canada, Japan and Switzerland to support markets by easing lending policies. The important action was a signal to the markets that Central Banks will step up and take serious actions to shore up the crisis. Obviously, there is no permanent or easy solution to the problem. The crisis in Europe stretches far beyond local debt problems; it is rather a systematic crisis of the union, where currency issues, distribution of power and even international relationships are involved. While analysts and journalists speculate about possible cures and the probability of EU breakup scenarios, German Chancellor Angela Merkel says the resolution process will take years.

The Rating agencies, particularly S&P, appeared to learn lessons from the recent crisis. They seem to maintain greater focus on timely downgrading of borrowers, especially governments. S&P will possibly cut the triple-A debt rating of France as early as this coming week, according to the past week’s news. The agency has recently downgraded Belgian debt from AA+ to AA. Interestingly, just a few weeks ago, S&P released an announcement of France’s downgrade. The announcement stayed active during several trading hours, until it was recalled by S&P as a “mistake.”

In the United States, the Consumer Confidence measure jumped to 56 while expectations were 45. The strong standing of consumers perhaps contributed to the growth of Motor Vehicle Sales in November and the sweeping success of the Black Friday weekend, when retail sales bested records. By the way, there isn’t anything dramatic behind the “Black” color in the name of the day that jump starts holiday shopping season. The story is rather simple and down-to-Earth: once upon a time, retailers broke a chain of losses (“red ink” in accounting terms) and crossed into positive (“black ink”) with the help of holiday sales. The Friday after Thanksgiving has been labeled “Black” since that time.

Pending Home Sales, a measure of deals struck on existing homes, jumped 10.4 percent in October after a 4.6 percent decline in September. New Home Sales rose slightly in October, but the overall market for new housing remains in a depressed mode. Median prices fell 0.4 percent to $212,300 and seasonally adjusted annual sales of 307,000 are still far from a healthy market threshold of 700,000. Mortgage applications dropped this past week marking the third week of declines in a row; the trend is mostly attributed to the slowing interest in refinancing.

The Chicago PMI set the tone of the week. The index accelerated to 62.6, above the consensus mark and well above the threshold of 50, suggesting good economic growth. The ISM Manufacturing Index for November was also reported at a higher-than-expected level of 52.7, above the level of 50, indicating growth. Construction Spending extended its stable upward trend and increased 0.8 percent topping the forecast of 0.3 percent after 0.2 percent growth in September. Per the Productivity and Costs report of the Bureau of Labor Statistics, labor productivity increased in the third quarter and labor cost fell more than expected. Compensation rose an annualized 0.6 percent.

Manufacturing activity in other parts of the world continued to slow down. Even China showed signs of contraction for the first time in three years and warned that the situation is on a dangerous path. Industrial production in the Eurozone continued its decline, reinforcing recessionary fears. On Wednesday of this past week, Central Banks of China and Brazil relaxed monetary policy in an attempt to counter the trends.

Per the ADP National Employment Report, employers added 206,000 jobs–many more than the 130,000 that was estimated. Cautious optimism sparked by the ADP report gained ground later in the week, when the Employment Situation data showed the lowest unemployment rate in 2.5 years at 8.6 percent as compared to the previous reading of 9 percent. Rising weekly unemployment claims reported Thursday was much less of a concern with more influential positive reports in the background. The improving employment situation along with strong domestic manufacturing readings and good news in retail strengthened the hopes of a sustained recovery in the United States.

This week will be light in news. Factory Orders and ISM Non-Manufacturing Index will be reported on Monday; Jobless Claims come out, as usual, on Thursday; International Trade and Consumer Sentiment will conclude the week on Friday. Have a very pleasant and delightful holiday season ahead. Stay tuned!

Last week was a short week, as the stock market was closed on Thanksgiving Thursday and half of Friday. The day after Thanksgiving is considered the start of the holiday shopping season… which brings much joy to retailers. According to a survey by the National Retail Federation, total spending over the three-day weekend following Thanksgiving reached a record $52.4 billion, up 16% from the $45 billion last year. GSI Commerce reported a three-fold increase in U.S. mobile sales this Black Friday, compared to 2010. Retailers are hoping for a bigger surge on Cyber Monday — which tends to be a peak day for online retail sales, and which typically surpasses sales from Black Friday. However, due to mixed news from Europe and the lack of strong economic indicators, the stock markets last week never got out of their bearish mode. Even in the minutes from the Nov 1-2 FOMC meeting, the Fed acknowledged that the biggest risk to growth is the potential effects from European sovereign debt developments on financial markets.

Last week, all major indices were down by nearly five percent. The S&P closed at 1,158 while the Dow ended the trading week at 11,232. Moody’s cautious warning on France’s debt rating on Monday shattered investors’ confidence. Stocks gained some ground after the IMF opened a new liquidity line. In mixed domestic indicators, Durable Goods Orders were down for October due to a fall in aircraft orders. On the positive side, Personal Income for October was up slightly. Also, wages and salaries were up for the month of October. On the employment front, there was some sign of stability as initial jobless claims were below the 400K mark for the straight third month.

The Ten-year treasury yield was up slightly and ended the week at 1.96 percent. Towing the same line, mortgage rates were also up a bit last week. At the end of the week, the Conforming Fixed 30-year rate leveled out at around 3.80%, while the Conforming Fixed 15-year rate finished at around 3.25%. Standard 5/1 ARM rates were last seen hovering at around 2.87%.

This week, investors will be focusing on the France-Germany pact for solving the Euro debt crisis. In other major economic indicators, housing sector health will be gauged from New Home Sales on Monday and Pending Home Sales on Wednesday. The ADP Employment report and the Employment Situation report on Wednesday and Friday respectively will inform investors more as to the unemployment situation.

ABBA First Mortgage, Inc. will be closed on Thursday, November 24th and Friday November 25th in observance of Thanksgiving. We will resume normal business hours on Monday, November 28th.

We look forward to serving all of your mortgage needs… Happy Thanksgiving!

For investors, these are clearly volatile times. Many market pundits feel that if governments do the right thing and work through their problems, then confidence will return, and the economy will recover. However, continued delays to resolve problems can lead to worst-case scenarios unfolding. Politics, mainly around Europe and U.S. debt, is one of the major causes of these uncertain times and thus vacillating markets between hopes and despair. Investors may be uncertain about their next move but shoppers are ready to camp for the door-buster “Black Friday” this week. Congress may not reach a deal by Wednesday on the debt ceiling plan but shoppers have already narrowed in on the deals they might target this week.

The Congressional “Super Committee” is not turning out to be so super after all. The deficit-cutting Committee likely will announce tomorrow that it has failed to reach agreement on at least $1.2 trillion in federal budget savings which will then be followed by the political blame game. The stalemate over spending versus taxation may only be resolved after the next election. The political situation is worse in Europe. The debate is whether ECB should actively buy the sovereign debts of troubled nations or wait for political resolution first. European Central Bank President, Mario Draghi, is unwilling to make large-scale bond purchases to extinguish a debt crisis that has spread from Greece to Ireland, Portugal, Italy and Spain, threatening to tear the 17-nation monetary union apart. While the ECB is intervening in debt markets in an attempt to lower soaring yields, it’s refusing to unleash the unlimited firepower that some governments are calling for. The issue is turning into a German versus the rest of the Union. The German bond yield is watched closely by Europeans, who consider it to be the gold standard of stability. The fact that the German bond yield was moving in the opposite direction of its neighbors’ bond yields indicates a widening spread that is further undermining the credibility of the weaker governments.

Amidst these political black clouds, the silver lining is that the U.S. economy may end 2011 growing at its fastest clip in 18 months as analysts increase their forecasts for the fourth quarter just a few months after a slowdown raised concerns among investors. Economists at JPMorgan Chase & Co. in New York now see gross domestic product rising 3 percent in the final quarter, up from a previous prediction of 2.5 percent, while New York-based Morgan Stanley & Co. boosted its outlook to 3.5 percent from 3 percent. The incoming data on consumption, business spending and residential investment all point to better GDP growth in the fourth quarter. The index of U.S. leading indicators, designed to foreshadow the economy’s performance over the next three to six months, rose 0.9 percent in October, the biggest jump since February, after a 0.1 percent September increase, the New York- based Conference Board said today. Sales of previously owned homes in the U.S. unexpectedly rose in October, a sign falling prices may be attracting buyers. Purchases increased 1.4 percent to a 4.97 million annual rate.

Importers in the U.S. are enjoying the rally in the dollar as we head into holiday season. As the Euro is losing its alternative status to the dollar as a reserve currency, only gold seems to be an alternative in the current environment. While importers can enjoy the strong dollar, shoppers are seen to be keen in opening their wallets and purses during this holiday season, as per analysts’ collective foresights. Some signs emerged indicating that consumers were doing just that. On Wednesday, data from comScore Inc. forecast online spending of $32.4 billion during this year’s holiday-shopping season, an 11% rise from the same period a year ago. The research firm also said consumers spent $9 billion online in the first 21 days of November, up 13% over the first three weeks in November 2010. Hopefully, higher business activity may give momentum to the stalling economy worldwide.

The holiday week ahead is filled with important data on GDP and FOMC minutes reports to be released on Tuesday with Durable Goods Orders and Jobless Claims releases on Wednesday. Markets will be eagerly looking at updates from Europe and the Super Committee this week while families get together and enjoy their Thanksgiving dinner.

The third rock from the sun spins fast & furious. It is hard to believe how the most revered leaders can fall from grace in the blink of an eye in today’s world. Two European leaders made tactical errors that led to their resignations last week. Italian Prime Minister, Silvio Berlusconi, resigned on Tuesday after he failed to get a key budget measure passed. George Papandreou, the Greek Prime Minister, resigned on Wednesday. Papandreou, after securing a European bailout, wanted to submit the bailout to a referendum. He later canceled the referendum, but, he had already lost support from both other European leaders and supporters within his party. Both countries are facing severe austerity measures to keep from defaulting and retaining their membership within the EU. While the leaders did what they needed to to keep their countries afloat, they eventually lost support from their most ardent supporters. Only time will tell if their successors will be able to stabilize the economies.

As news out of Europe dominated headlines this week, it was a slow week from the standpoint of U.S. economic releases. The reports that came out were mostly good. Consumer Credit was up 3.6 percent in September. The biggest increase came in Student Loans. Revolving credit was down 1 percent. In addition, U.S. companies had more job openings in September. Job openings rose to 3.35 million, up from 3.13 in August. This marks the most openings since August 2008. The National Federation of Independent Business released its small business confidence index. It rose 1.3 points in October. This means that small business is confident that conditions will be better six months from now.

In mortgage news, Mortgage Applications rose 10.3 percent for the week ending November 4th, driven principally by refinances. The low rates keep attracting new customers. While mortgage rates are falling, so are home prices. For the period July-September, the median home price fell from $177,800 last year to $169,500 this year, a 4.7 percent drop. Congress may provide some relief soon. While they let the higher loan limits expire on September 30th, there are rumblings that they may re-instate these limits again.

While the markets reacted favorably to the majority of these reports, news out of Italy devastated the market on Wednesday. The Dow Jones dropped almost 400 points largely due to fears that Italy would default. Unlike Greece, Italy is considered too big to be bailed out. So, any negative news out of Italy has a bigger impact on the markets. However, the news wasn’t as bad as it seemed. Italy auctioned bonds on Thursday and they were able to sell them for 6.9 percent, better than the 7+ percent investors thought Italy would have to pay. At 7 percent, many fear that Italy would not be able to sustain borrowing costs. It was a relief that Italy remained under that threshold. S&P also announced that France would keep its AAA- rating. The news out of Europe, along with positive news at home, led stocks to somewhat of a comeback. The market gained over 100 points Thursday and 260 points on Friday. Jobless claims fell by 10,000 last week & the four-week average fell 5,250, to 400,000 — the lowest level since April 16. The Trade Deficit, according to the Commerce Department, also fell 4 percent or almost $2 billion in August.

Italy elected Mario Monti, former European Union Competition Commissioner, as Prime Minister. In Greece, Lucas Papademos was elected Prime Minister. Greece also formed a new Unity Government on Friday. The early indications show that the markets will look favorably on these changes. Asian Markets opened higher and received a boost from Japan’s reported a 6 percent increase in GDP.

The bond market was closed on Friday in observance of Veteran’s Day. Thank you to all the veterans that have served our country.

In the words for President Ronald Reagan, “Let us continue to stand for the ideals for which they lived… and died.”

This week’s releases include:

• Tuesday: Retail Sales, Producer Price Index, the Empire State Index, and Inventories.Wednesday: Consumer Price Index, Industrial Production and the Home Buyers Index.
• Thursday: Jobless Claims, Housing Starts, and the Philly Fed report.
• Friday: Leading Indicators.

Have a good week and thank you for your business.

Please note that ABBA First Mortgage will be closing on Friday, November 11th at 12 noon in observance of Veterans Day.

We hope that you take this day to remember the many men and women who have fought so bravely to protect the freedoms that we enjoy.

Retailers are eager to begin the holiday season, staging Christmas displays here and there, even though it is still October. The upcoming “Black Friday,” which is the Friday after Thanksgiving that is believed to signal the strength of overall holiday shopping, will be a delight for shoppers. Target announced it will be opening its stores at midnight, just as Wal-Mart did last year, in addition to the super-centers already open 24-hours. Under the eyes of investors’ many stores, such as Sears and K-Mart, Toys “R” Us, Gap and Banana Republic opened on Thanksgiving morning last year too, embarking on some extra beginning-of-the-season sales.

As a part of the pre-holiday rush, price wars erupted in the world of retail merchandising. Wal-Mart was reported to provide its customers gift cards if they find merchandise sold cheaper elsewhere. Staples and Bed Bath and Beyond are focused on fighting on-line competition and were said to be ready to match Amazon.com prices, as opposed to Sears that is going to beat prices of competitors by 10%, excluding on-line only retailers. With so much action and improved Consumer Confidence, exceeding expectations for October, strong Consumer Spending, even though it comes from personal savings, per the Personal Income and Outlays report, we are looking forward to a boost to the economy this Fall.

The early Christmas mood in stores might be blamed on the record snowfalls on the East Coast this past weekend; maybe the snowstorm was a product of a spell by the powerful “Wicked Witch of the East” (The Wonderful Wizard of Oz) or custom-ordered by the “Occupy Wall Street” protest opponents to help turn the financial center’s occupants into merry holiday-themed snowmen on display.

Whirlpool announced it was slashing its’ workforce by 5,000 jobs, about 10 percent of employees in North America, in a latest cost-cutting effort. As sales slowed down, it was reported that Whirlpool complained that some appliance manufacturing companies, LG and Samsung among them, supposedly started selling their products below fair value; the strategy called “dumping” violates international trade law. Samsung and LG, along with Sharp and Toshiba, fell under fire recently for just an opposite unfair pricing strategy — “price fixing” on LCD monitors. The companies were sued for holding artificially high the prices of the LCD panels supplied to the U.S. over the last decade.

Caterpillar, the world’s largest heavy machinery manufacturer, reported that they hired about 5,000 workers during the past quarter when their profit jumped 44%. Caterpillar is looking to post 2011 profits at a record high and expects a momentum spillover into the next year. Despite Caterpillar’s triumph, the Durable Goods orders, a forward looking indicator of economic activities, came out low this past Wednesday; the decline in the aircraft industry is blamed for this effect.

The labor related moves of Caterpillar and Whirlpool are very illustrative of the job market condition. As some employers increase their labor force, others still let people go, holding misery in the job market constant. New unemployment claims this past week moved down slightly, but still stayed above 400,000, demonstrating no significant improvement. The Employment Costs Index rose only 0.3 percent in the third-quarter, the slowest pace in two years. This is yet another sign of the anemic job market that is contributing to keeping inflationary pressures down.

The Chicago Fed National Activity index, a weighted average of 85 economic indicators, rebounded to -0.22 in September, still less than forecasted. The GDP growth nevertheless was higher in the third-quarter, at a decent 2.5 percent. Investors are cautious in their conclusions, since sustainability of the growth rate remains unknown and the GDP number often gets revised some time after its initial release.

The housing market weakness continues. The MBA reported a decrease in mortgage applications this past week; both new home sales and pending home sales dropped, signaling no signs of improvement in the near future.

The Wall Street Journal article this past week began with citing a joke by Stephen Schwartzman, head of Blackstone Group L.P., an asset management giant. Mr. Schwartzman said that parents of Brian Moynihan, Bank of America CEO and Patrick Moynihan, a deacon and missionary running a boarding school on Haiti, must be proud that both their sons run under-funded non-profit organizations. The article then explains that present times are tough for the banks; going forward, banks are facing sluggish economic growth that undermines lending volumes, restructurings due to mandatory separation of the investment activities and the long-term impact of low-quality mortgage portfolios. At the same time, the perception of the banking industry as highly profitable for investors and low-cost for customers puts additional pressure on banks. The recent introduction of a debit card fee by Bank of America, amongst others, in an attempt to push up banks’ fee income, led to such a negative clients response that Chase and Wells Fargo announced joining the camp of the institutions not charging debit card fees. The new European debt deal that was cheered by the markets this past week is actually bad news for the European banks. Fifty percent debt forgiveness on the sovereign bonds of Greece will put additional pressure on the banks to raise capital. After an extraordinary rally, markets seem to be into more of a profit taking mode so far this week.

Investors are looking forward to the week loaded with economic news. Chicago PMI was reported today; on Tuesday, Motor Vehicle Sales, ISM Manufacturing Index and Constructions will be released.; Wednesday begins with the ADP Employment report; an announcement of the 2-day FOMC meeting outcome is scheduled for 12:30 pm followed by the Fed Chairman, Ben Bernanke’s, press conference at 2:15 pm; Thursday is a release day for Jobless Claims, Productivity and Costs, Factory Orders and ISM Non-Manufacturing Index; the Employment Situation report will conclude the busy week on Friday. After close of the market today, economists forecast increased probability of seeing witches and other unexpected non-economic factors above and beyond the business world. Stay tuned.