AM 1150 Kelowna - Radio Rallies & Reversals

MBA Mortgage Applications last week were down again, and that's despite record low interest rates; On top of that, the US Home Price Index for July was down for the second straight month, and June's number was revised even lower. This may explain why North American stock indexes are all in the red today.

Yesterday's FOMC announcement could be interpreted as having an easing bias, which according to Credit Suisse, could play out in the FED expanding its balance sheet by purchasing more treasuries and driving interest rates lower. The FED's outlook on inflation and employment will be key to any further quantitative easing (also known as printing money).

Another interesting bit of news from Credit Suisse is their thoughts on corporate pension plans in the US. They believe the underfunded pension status of S&P500 companies worsened in 2009. One solution to bridge the gap would be to borrow money given low interest rates, but that's just swapping debt. Bottom line - some of that cash sitting on corporate balance sheets may flow into pension plans, which would have an impact on earnings, and economic growth.

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