Lowe's 4Q Earnings Show Double Digit Profit Gains; Fed to Begin Raising Discount RateFeb 22 2010
February 22, 2010 - Last week, the Federal Reserve took center stage by raising its discount rate; the rate at which banks can borrow money directly from the Federal Reserve. While this move has very little immediate impact, the increase was widely viewed as a symbolic first step in beginning to remove the emergency measures put into place to stem the economic downturn.
In addition to the rising discount rate, the Federal Reserve's meeting minutes released last week showed a heavy debate over the Fed's balance sheet. Several members would like to see some liquidity being removed from the market, but as Fed Chairman Ben Bernanke stated in his recent testimony, the Fed is likely several quarters away from raising rates and draining stimulus money.
With last week's jump in housing starts and a slew of positive indices, many are considering Lowe's 4Q earnings as another upbeat sign the housing market is beginning to turn around. The home-improvement retailer announced that they saw a double digit profit gain during the last few months of 2009. Home Depot is expected to release their figures early this week.
This week, and coming weeks, could begin to see mortgage rates become more volatile as the market digests everything coming out of the Fed. We'll also get new and existing home sales data this week. With housing and employment as the weakest link, any positive news could have an impact on rates.