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!

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

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.

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, 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.