Market news on rollercoaster

The past week has been a rollercoaster ride as a myriad of factors hit the U.S. market. Jubilation over historic lows for 30-year mortgage rates and 10-year treasury bonds was tempered by a dismal employment growth report for May and more bad news from European markets. Nervous investors sent the Dow plunging 275 points for its biggest loss of the year. Fast-forward a few days and the Dow saw a surge to 286 points turning the market positive for 2012.

Two key central-bank related events last week (a European Central Bank officials meeting on Wednesday and the U.S. Federal Reserve Chairman’s Congressional hearing on Thursday) focused on resolving the lingering European debt crisis and revealing any planned easing of U.S. monetary policies. The prospect that both central banks were preparing to do more to resolve problems triggered global rallies.

European officials are mired in the struggle to find ways to ease the region’s debt crisis and considering a plan to lend money from the European bailout fund to rescue banks in Greece and Spain. The Commission's plan proposes to force losses onto bondholders of a bank. Further, ECB officials decided not to lower rates this summer despite increased downside risks.


European Central Bank

The Fed’s chief, Ben Bernanke, was grilled by the Joint Economic committee on the state of the American economy. His highly anticipated testimony was closely watched for any hint of quantitative easing to support growth. Nothing unexpected came out of his testimony. In response, the bond markets that underpin the secondary mortgage market fell into a sideways drift.


Federal Reserve

Both the ECB and Fed pushed back on elected politicians to do more to bolster growth, reduce risks and eliminate uncertainty. With the 2012 political primaries in the U.S. now in the rearview mirror the weak economy will be the driving issue for the duration of the campaign season. Party nominees will be in high gear to offer solutions that will promote growth and gain the voters trust to lead the country into the long awaited recovery.