Existing home sales fell to levels not seen in 12 years, proof of the discontent that citizens are feeling toward the U.S. economy, markets and related investments and exchange traded funds (ETFs).
The National Association of Realtors said Wednesday that sales of existing homes fell 5.3%, flashing back to 1997. Potential buyers are waiting on the sidelines to see what President Barack Obama has planned for the housing industry and economy at large, reports Alan Zibel for the Associated Press.
The median sales price in January plunged to $170,300, down 14.8% from $199,800 a year earlier. An unclear picture of the job market, a seemingly bottomless housing market and unstable credit and banking system, along with lost retirements, are all factors contributing to the malaise.
- iShares FTSE NAREIT Real Estate 50 (FTY): down 13.9% over three months; up 2.9% over one week
Thus far, banks are saying they have enough money, with enough capital to keep them afloat, however, this may not be the capital they need. The issue is coming to the fore as federal regulators start administering a tough new “stress test” to 20 large banks on Wednesday to determine how the banks would withstand a severe economic downturn, says Eric Dash on The New York Times.
Up until last Fall, investors focused upon Tier 1 capital, which consists of common stock, preferred stock and hybrid debt-equity instruments. Now, however, they are focusing on what is called tangible equity capital, which includes only common stock, saying it is a better way to measure the risk in bank shares.
The difference is technical, something an accountant would study, but t does answer the questions: Are the nation’s banks sound? And are bank shares a good barometer for the health of the financial system?
In last nights’ speech, Obama addressed the need for tougher financial regulations, to restore trust and accountability within the financial markets. The President – echoing Federal Reserve Chairman Ben Bernanke earlier in the day – spoke directly about the need to resolve the financial crisis if we’re to have any hope of sustaining a recovery, reports Aaron Task on Tech Ticker. The downward spiral has to be broken so that business will resume.
- Financial Select Sector SPDR (XLF): down 26.8% over three months; up 1% over one week
For the month of January, massive layoffs continued: Companies from a wide range of sectors announced tens of thousands of layoffs, including Home Depot Inc. (HD), Boeing Co. (BA), Pfizer Inc. (PFE) and Caterpillar Inc. (CAT). The Labor Department reported that mass layoffs, or job cuts of 50 or more by a single employer, went up to 2,227 in January, says Christopher S. Rugaber for the Associated Press.
Canadian telecom equipment company Nortel Networks Company is bankrupt and plans to cut its work force by 3,200 jobs worldwide. Nortel filed for creditor protection Jan. 14 in Canada and the United States, according to the Associated Press.