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US stock market daily report (January 08, 2013, Wednesday)

Contributed by Millennium Traders

The U.S. mortgage market will be overhauled this week as federal rules are expected to be released with regulators aiming to protect consumers while also establishing new legal protections for lenders, and safer mortgages. There’s a January 21 deadline to finalize rules on mortgage servicing, compensation for loan originators and appraisals for high-risk mortgages, among other areas. The Consumer Financial Protection Bureau (CFPB) is expected to finalize rules for mortgages that are considered structurally safer, on Thursday, that will include underwriting standards that include borrowers being able to repay their loans. Regulators are expected to give lenders, who make these “qualified mortgages”, legal protection from borrowers who sue when loans go bad. Because the final rules are expected to paint a bold line for lenders when it comes to legal protection, it’s likely that institutions will largely limit their debt offerings to these qualified mortgages. Implementation of new mortgage rules could be take up to one year to implement. Federal regulators have considered defining qualified mortgages as those for which borrowers spend at most 43% of pretax income on mortgage payments. Currently, regulators which include Federal Reserve Chairman Ben Bernanke, remain concerned that access to credit has become too tight, with responsible borrowers unable to obtain mortgages. Hope is that providing legal protection to lenders who make qualified mortgages will encourage more lending. According to a statement from the American Bankers Association, “Banks are not likely to operate outside the legal guarantees offered by the qualified mortgage protections, meaning that the safe harbor rules will largely determine the scope of all future mortgage lending.”

According to Federal Reserve data, U.S. consumers credit increased in November by a seasonally adjusted $16.1 billion, marking the second straight sizable gain and expanded at an annual rate of 7.0%, up from 6.2% in October. Consumers racked up a slightly revised $14.0 billion in additional debt during October. Much of the increase during November came from non-revolving debt such as auto loans and student loans totaling $15.2 billion. Also during November, credit-card debt grew by less than $1 billion which signals that Americans remained cautious during the general first shopping month of the holiday season. Consumer credit stood at $2.77 trillion at the end of December, up 5.2% since the beginning of 2012.

After a three trading session decline amid signs of stepped-up demand in Asia, gold futures settled higher Tuesday, reclaiming some of the 2.5% drop it suffered. On the Comex division of the New York Mercantile Exchange, gold for February delivery rose $15.90 an ounce or 1%, to settle at $1,662.20. Reportedly, the Shanghai Gold Exchange reported a sharp climb in physical gold trading on Monday. The apparent increase in demand comes less than five weeks ahead of China’s Lunar New Year which begins on February 10. Deutsche Bank reduced its average gold forecast for this year by 12.1% to $1,856 an ounce, as well as by 5% to $1,900 an ounce for 2014.

Silver, which is notoriously more volatile than gold, saw its March contract tack on 38 cents or 1.3% to $30.47 an ounce, extending a 0.5% gain from previous session. Deutsche Bank also cut its price outlook for silver, by 16.8% to $37 an ounce for 2013 and by 5% to $38 for 2014.

Other precious metals results for the day include: March copper which closed down less than a cent or 0.2% to $3.67 a pound; April platinum tacked on $26.90 or 1.7% to $1,583.20 an ounce; March palladium ended the session down $2.15 or 0.3% to $667.85 an ounce.

The U.S. Congressional Budget Office estimated on Tuesday that the U.S. government ran a budget deficit of $1 billion during December, bringing the total shortfall for fiscal Q1 2013 to $293 billion. The December deficit was $85 billion less than the same month during 2011. Receipts in December 2012 were nearly $30 billion more than 2011. December spending was $55 billion lower.