Expectations for a cut in U.S. interest rates rose on Wednesday as the housing market continued to show signs of weakness and the largest U.S. securities brokerage met with its first unprofitable quarter in nearly five years.
The U.S. housing market took another hit today as a government report showed sales of previously owned homes fell to record low levels amid a deepening slump which has seen increasing foreclosures and tougher lending requirements.
Sales of previously owned homes fell 8 percent in September to a record low 5.04 million annual rate compared to August which saw a rate of 5.48 million, below expectations of 5.25 million. The 5.04 million rate is the lowest since the National Association of Realtors started keeping track in 1999.
The NAR said the sales decline in September was due to tighter credit availability in August as lenders grown increasingly concerned over delinquencies in the so-called 'subprime' market, which offers loans to people with poor credit.
Meanwhile, brokerage Merrill Lynch reported that it had to write down $7.8 billion due to bad bets in mortgages and asset-backed debt.
Merrill Lynch's write-down was significantly higher than its estimate of a $5 billion write-down in early October. The company said it has uncertain expectations about market conditions for sup-prime mortgage-related assets.
Concerns over growing problems in mortgage-related securities have caused their value to plummet in the open market. Recently, several large banks, with the mediation of the Treasury department, announced they would create a fund worth up to $80 billion to help avoid fire-sale prices for the securities.