2008 Trading Year Draws to a CloseU.S. markets close out 2008 trading on Wednesday, as futures show a mixed opening. Foreign markets were up mostly higher, including Toyko and Asian markets ending 2008 higher in the final day of trading. U.S. stock markets are open for a full day of trading and will be closed on Thursday. Futures on Dow Jones and S & P were up; Nasdaq futures were slightly down.
Markets are expected to gain momentum on the new president Barack Obama's inauguration and his stimulus plan. Expected fourth quarter earnings reports are out in January and are expected to bring dismal results.
Mortgage Applications Still Up
The low interest rates at year's end kept demand for U.S. mortgages at a five-year peak. During the Christmas holiday week, demand for U.S. mortgage applications was unchanged, with loan rates near record lows, says the Mortgage Bankers Association.
The cost to borrow has dropped more than 1-1/2 percentage points from the summer and is expected to drop even further in the worst housing market since the 1930s.
The Mortgage Bankers Association's seasonally adjusted index of mortgage application activity was unchanged last week at 1,245.7, matching the highest level since July 2003.
Requests for home purchase applications climbed 1.4 percent, refinancing applications dropped 0.4 percent. The refinancing index had surged by nearly 63 percent in the prior week, also to the highest level since July 2003.
In November the Federal Reserve announced it would buy $500 billion of mortgage-backed securities, and in December it added it will expand those purchases to lower mortgage rates. These actions have cut borrowing costs.
Bank Lending Slashed in 2008
The number of loans made by banks fell to the lowest volume since 1994, as banks work to repair balance sheets and avoid underwriting new, risky loans in a poor economy.
Data from the Reuters Loan Pricing Corp. shows loan issuance in 2008 dropped 55 percent to $764 billion. Loans made in 2007 totaled $1.69 trillion.
All types of loans dropped by at least half of the loans issued in 2007. Investment-grade loans dropped to $319 billion, down 52 percent from 658 billion. Leveraged loan issuance also plummeted to $294 billion, down 57 percent from $689 billion in 2007.
JPMorgan was the lead issuer for U.S. loans in 2008, with $198.5 billion, or 26 percent market share, followed by Bank of America, with $137.4 billion, or 18 percent market share; and Citigroup, with $116 billion, or 15 percent market share. Lending is expected to remain slow in 2009, according to a survey of loan market makers.