The Dow Jones Industrial average fell 136.34 points to close at 14,936.24 Monday. The Standard & Poor’s 500 index fell 14.38 points to 1,676.12, the lowest in a month. The NASDAQ composite fell 37.38 points to 3,770.38. On this the Seventh Day of the Government Slim Down.
The price of oil fell to $103 a barrel Monday as a partial U.S. government shutdown entered a second week and crude production in the Gulf of Mexico got back on track after a storm system passed through.
TREASURY BILLS ROSE IN MONDAY’S AUCTION
Interest rates on short-term Treasury bills rose in Monday’s auction to the highest levels since late August. The Treasury Department auctioned $35 billion in three-month bills at a discount rate of 0.035%, up from 0.010% last week. Another $30 billion in six-month bills was auctioned at a discount rate of 0.060%, up from 0.040% last week. The three-month rate was the highest since three-month bills averaged 0.040% on Aug. 26. The six-month rate was the highest since these bills averaged 0.065%, also on Aug. 26.
MORTGAGE RATES FALL FOR THIRD CONSECUTIVE WEEK
As a result of the federal government shutdown and declining consumer confidence, fixed mortgage rates fell for the third consecutive week, Freddie Mac reports, ending at their lowest averages in nearly four months. Retreating interest rates are generally good news for home buyers, however, the University of Michigan reports that overall consumer sentiment is at its lowest since April. Freddie Mac reports the following national averages with mortgage rates for the week ending Oct. 3:
• 30-year fixed-rate mortgages: averaged 4.22 percent, with an average 0.7 point, dropping from last week’s 4.32 percent average. Last year at this time, 30-year rates averaged 3.36 percent.
• 15-year fixed-rate mortgages: averaged 3.29 percent, with an average 0.7 point, dropping from last week’s 3.37 percent average. Last year at this time, 15-year rates averaged 2.69 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 3.03 percent, with an average 0.6 point, dropping from last week’s 3.07 percent average. Last year at this time, 5-year ARMs averaged 2.72 percent.
• 1-year ARMs: averaged 2.63 percent, with an average 0.4 point, holding the same as last week. A year ago at this time, 1-year ARMs averaged 2.57 percent.
The shutdown is having some impact on federal housing and mortgage programs. The Federal Housing Administration's Office of Single Family Housing is endorsing new loans, however, the IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts. Lenders often require such documentation from mortgage applicants, but some are adopting revised policies during the shutdown that will allow for processing and closings with income verification to follow. Fannie Mae and Freddie Mac have also adopted relaxed provisions on loans requiring a Form 4506T, allowing closings that are subject to tax transcript verification before the GSEs purchase the loans.
CANADIAN TECH FIRM RESPONSIBLE FOR GLITCHES IN HEALTHCARE.ORG
A Canadian tech firm is behind the glitch-ridden United States national health care exchange site healthcare.gov. CGI Federal is a subsidiary of Montreal-based CGI Group. With offices in Fairfax, Va., the subsidiary has been a darling of the Obama administration, which since 2009 has bestowed it with $1.4 billion in federal contracts, according to USAspending.gov. The company is deeply embedded in Canada’s single-payer system. CGI has provided IT services to the Canadian Ministries of Health in Alberta, British Columbia, New Brunswick, Quebec and Saskatchewan, as well as to the national health provider, Health Canada, according to CGI's Canadian website.
SWIFT AIR’S REORGANIZTION APPROVED IN BANKRUPTCY COURT
The U.S. Bankruptcy Court, District of Arizona granted final approval to Swift Air's proposed plan of reorganization, thus paving the way for the company's emergence from bankruptcy protection by mid-October. The company's reorganization plan was overwhelmingly supported by the company's creditor constituencies. Following last week’s proceedings, Swift's CEO Jeff Conry said that "this is an important milestone in the company's continuing steps to complete its financial restructuring and emerge from chapter 11 in the very near future. We are gratified to have the support of our plan sponsor, Nimbos Holdings, as well as the Official Creditors' Committee." Ken Woolley, the principal behind Nimbos Holdings and the plan's financial backer, said, "We are very excited about the company's upcoming emergence from chapter 11, and look forward to a very successful future with the company."
CREDIT CARD DEBT DROPPED IN AUGUST
WASHINGTON – The consumer credit report is one of the few government reports issued since the shutdown began. The Fed kept operating because it does not depend on budget appropriations from Congress. Americans cut back on using their credit cards in August for a third straight month, a sign that consumers remain cautious about spending. Consumers increased their borrowing $13.6 billion in August to a seasonally adjusted $3.04 trillion, the Federal Reserve said Monday. That’s a record and it followed a gain of $10.4 billion in July. Once again, the increase in borrowing was driven entirely by auto and student loans. A measure of those loans rose $14.5 billion to $2.19 trillion. But credit card debt dropped $883 million to roughly $850 billion. The decline could hold back consumer spending, which accounts for roughly 70% of economic growth. The economy grew at a modest 2.5% annual rate in the April-June quarter. Most economists expect growth slowed in the July-September quarter to an annual rate of about 2% or less, held back in part by weaker growth in consumer spending. Analysts had thought that consumers would step up spending and help drive faster growth in the final three months of the year.
NORTHERN ARIZONA BUSINESSES PROTEST AT GRAND CANYON
TUSAYAN, Ariz., Oct. 7, 2013 - There is going to be a protest at the gates of the Grand Canyon as businesses in Northern Arizona and the people who work there suffer because the federal government has turned down offers of financial assistance from South Rim business owners, the State of Arizona, and the adjacent town of Tusayan to partially open the Grand Canyon during the government shutdown as was done in 1995. The Town of Tusayan voted to appropriate more than $200,000 and businesses in the town have pledged another $150,000 to fund a partial opening of the Grand Canyon National Park during the government shutdown. The economic loss caused by closing the Canyon has created huge losses for businesses in northern Arizona. On October 4th, Arizona Senators John McCain and Jeff Flake wrote a letter to the Secretary of the Interior requesting that the department reconsider its refusal to use non-federal funds to operate the Canyon as was done during a government shutdown in 1995. The letter states in part: "We fail to understand why the Department and the NPS would dismiss the efforts of Arizonans trying to proactively address this situation." Governor Brewer, House Speaker Andy Tobin, and Senate President Andy Biggs also wrote President Obama asking the administration to allow the use of non-federal funds to operate the Canyon.