Stocks Give Up All of Yesterday's Gains

U.S. Stocks closed below Wednesday's lows today as traders appear to have rejected the House Democrats' stimulus package. Some weak economic data also contributed to the decline. Overall, it was just a weak day, and all one can do is chalk it up to the Bear Market. Tomorrow's GDP report may not have much affect on the market tomorrow, since earnings reports are already reflecting what happened in the 4th quarter. Next week's employment report will have a much greater impact on the market going forward. The bottom line is that it is still all about jobs and real estate.

Market leaders on the upside today were the precious metals, as money flowed back into gold and silver out of the Euro. The Dollar Index was up on the day, with most of its strength coming against the Euro. It looks like the British Pound is trying hard to stabilize at these levels, but it may need to re-test its recent lows before attempting any move higher from here.

Treasuries weakened considerably again today, as yields rose across the entire curve. I had heard it mentioned on CNBC that this would be a positive sign for the stock market. But, with weak Treasury prices and weak stocks, the best place to be appears to be gold and silver. Since governments and financial institutions can't seem to get their act together, the precious metals appear to be the safest bet for now.

I will say that if interest rates are unable to stabilize soon, the real estate market will be unable to recover. I had a conversation with a client over the weekend. They were desperate to lock in a previously negotiated interest rate for a commercial loan and had a deadline to meet early this week. If they could not meet the deadline, the rates had gone up too much to keep the deal together.

Over the last several weeks, interest rates on 10 Year Treasuries have risen about 70 basis points. Mortgages are tied closely to these rates, but the spreads are currently historically wide. As a result, even though these Treasury yields are quite low, the mortgage rates are nowhere near as low as they would have been a few years ago with these same rates. Investors and home buyers will continue to put off purchases as long as financing remains difficult.

Scott Cole
www.bestdaytradingstocks.com
www.kungfutrader.com