But key indicators that drive the economy — specifically housing, the stock market and unemployment — just aren’t cooperating.
According to the Mortgage Bankers Association, mortgage applications for home purchases dropped to their lowest level in 13 years last week, as homebuyers shied away from the housing market after the new homebuyers tax credit expired in April. Further darkening the landscape are U.S home prices. The Standard & Poor's/Case-Shiller 20-city home price index dropped by 0.5% in March from February — a sign that the housing industry remains in fragile health.
The Stock Market:
It wasn’t too long ago that the stock market was looking to crest the 12,000 mark. But the Dow Jones Industrial Average has fallen significantly in the past few weeks. On Monday, the Dow fell to 10,066 — that’s a drop of 1,138 points since its late April high of 11,205. So far today, things aren’t looking any better — the DJIA is down 225 points in early morning trading, to 9.841.Unemployment:
The May payroll numbers are out, and they show that jobless claims were up by 25,000 (to a total of 471,000). That’s the highest number in five weeks.
Economic numbers like these will likely drive more and more investors out of stocks and into U.S. Treasuries — a "safe haven" investment that offers protection from the economic elements but still promises a yield on the investment. But when Treasury prices rise, yields decline, and they take interest rates down with them.
That’s why we’re seeing a steady erosion in CD rates, which fell again this week, as measured by the BankingMyWay Weekly CD Rate tracker. CD rates have pretty much mirrored the direction of the 10-year Treasury Bond, where yields have fallen from about 4% on April 1 to about 3.2% in late May. The 10-year Treasury is a useful measuring stick for CD investors — when it declines, CD rates usually decline as well (and vice versa).