Traders-Blog.com

Today it was a day of losses for the U.S. stock market. The Dow fell 53.34 points, to close at 10,397.29. Besides, both the Nasdaq and the S&P posted losses. The Nasdaq fell 13.60 points, to close at 2,120.77, while the S&P closed at 1,205.10, after falling 7.27 points.

Negative economic news includes results of U.S. consumer sentiment for the month of August. The consumer sentiment index fell to 89.1 points in late August from 96.5 in July and 92.7 in early August. This shows the first decline since the month of May, but the largest decline since February of 2004. The consumer sentiment report has increased concern from investors about economic data from personal incomes and employment that will be released next week.

Bank stocks fell 1.2 percent today, which was the main reason for a decline in the S&P index. Higher interest rates decrease the value of bonds owned by banks, brokers and insurers. Therefore, JP Morgan Chase & Co., the third largest U.S. bank, lost 47 cents, to close at $33.65. And, Wells Fargo, the fifth largest U.S. lender, slipped 78 cents, to close at $58.79.

Today Federal Reserve Chairman Alan Greenspan said at the Jackson Hole Resort that high home prices are due to the low risk premiums demanded by investors, which at the same time have kept interest rates low. Greenspan also said that “history has not dealt kindly with the aftermath of protracted periods of low risk premiums”. In the past year national housing prices have risen 12.5 percent through the first quarter, and second-quarter price data still needs to be released next week. Also, Greenspan cautioned investors that in July investors will become too complacent about the risks of higher interest rates. Finally, the Federal Reserve Chairman said that central-bank forecasts and monetary policy are becoming highly driven by changes in asset prices, such as real estate.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter