Verdugo Hills House Talk

New York Times: 6/29/08 (see full story):

The bear peeked out of its cave on Friday. And then it retreated.

What are some of the forces that affect interest rates for home sales in La Crescenta CA & Glendale CA?  Let’s take a look… With a 145-point slide on Friday, the Dow Jones industrial average flirted with bear market territory, meaning that it is down 20 percent from its high on Oct. 9, 2007.   But the Dow managed to avoid the bear market label by the end of the day. The index finished down 106.91 points, or 0.93 percent, at 11,346.51, falling 19.89 percent since its October high. 

Another surge in the price of oil, which traded above $142 on Friday afternoon after gaining $5 a day earlier, discouraged investors and had helped nudge the Dow down 1.1 percent to 11,327 at 2 p.m. The blue-chip index was above 13,000 just five weeks ago.  Oil is fueling inflation fears, feeding into the Federal Reserve’s warning this week that prices could rise further in the months ahead. Crude traded at $140.21 a barrel, up 57 cents on the New York Mercantile Exchange.

Inflation remains a problem. The same report measured inflation at 3.1 percent in May compared with a year prior, well above the Fed’s so-called comfort zone.   

So far, Wall Street has avoided losses that match the painful declines on Thursday, when the Dow plunged 358 points. American investors also shook up a painful night in the Asian markets, which all suffered sharp declines.

While equities dropped, money flowed into the bond markets, creating more demand for fixed returns.  Demand for BONDS, such as Treasury and Mortgage bonds made the bond prices RISE.  The bonds yield or interest rate which acts INVERSELY to the price DROPPED on the buying.