Market commentary

Prince William and Kate Middleton are now married. Surprisingly, the markets appear to be unaffected as a result.

News that did hit the markets is best described by this headline: “Oil Prices Hitting Consumers”. This was particularly transparent in the report that personal income rose 0.5% in March, however, the moderate rise in incomes is barely enough to offset higher energy prices. Personal consumption rose 0.6% in the month and after subtracting out food and energy, spending only rose 0.1% in March. This tells us the higher oil prices are taking a big enough bite out of consumer expenditures to make real economic growth minimal.

The Chicago Purchasing Managers reported their business barometer dipped, but still reflects expanding economic activity.

Bond prices held firm Thursday in spite of a weak 7 year note auction, and commodity prices continue their trek higher following the Fed news release from this week’s FOMC meeting. Gold is up to $1,539/oz., silver is nearing $50/oz., and oil is trading north of $113/bbl. The U.S. dollar is trading at an 18 year low against the Chinese yaun.

The good news for us is mortgage prices are slightly better again today, just in time for the spring buying season.

Market commentary

Disappointing employment data this morning as Initial Jobless Claims surged 25,000 to 429,000, completely unexpected. It was disappointing to see the recent pop to 404,000, and expectations were for a small dip to 395,000.

In addition to the jobless claims, 1st Quarter GDP rose 1.8%, slightly lower than the 2.0% consensus and down from 4th quarter GDP of 3.1%. Higher energy prices, higher food prices, and the harsh winter weather were the main culprits for the decline in output.

Bond prices jumped on the news pushing interest rates lower. As the day wears on, however, the bond market is slipping causing mortgages to give back half of the days gains.

Market commentary

In this morning’s economic news, durable goods orders rose from 0.7% in February, a positive report that reflects continued business investment to which regional Fed surveys have been pointing.
Mortgage applications fell 5.6% as purchase applications fell 13.6%. Applications for mortgages continue to be space with refinance applications remaining well below their 10 year average despite mortgage rates remaining near four decade lows.

As usual on a Fed meeting day, the markets are eagerly awaiting the conclusion of the meeting when their official statement is released. Today it will be earlier than normal, 10:30 ET, giving the markets one hour and forty-five minutes to digest the statement before Chairman Bernanke will hold the FOMC’s first post-meeting press conference. The press conference is being held to improve transparency, per the FOMC. History tells us, however, that Fed Chairmen can speak at length without anyone learning a whole lot.

Tuesday saw a decent price improvement in bonds, which was a positive sign given the so-so results of the 2 year note auction. Today, in the midst of the Benanke’s news conference the U.S Treasury will auction $35 billion of 5 year notes.

This morning bond prices are giving back some of Tuesday’s gains with the yield on the 10 year note rising to 3.36%.

Market commentary

The Conference Board reported its consumer confidence index rose to 65.4 from a revised 63.8 reading in March. Perhaps consumers are more confident as the spring weather replaces the cold and snow. It seems unlikely confidence would be higher based on data from the S&P/Case-Shiller index of property values. Residential real estate prices fell 3.3% on a year over year basis from February 2010 to February 2011, the largest decline in more than a year. Given the decrease in home prices and the low interest rates, home affordability is at its best levels in decades. Tight underwriting guidelines and job uncertainty given the fiscal state of affairs in the U.S. are keeping buyers away.

Important topics to note for the remainder of the day are the beginning of the two day FOMC meeting today, gold is still above $1,500, oil remains over $112 per barrel, and the U.S. Treasury will auction $35 billion of 2 year notes.

The U.S. stock and bond markets are both in positive territory today, with the DOW trading higher by 120 points and the yield on the 10 year note falling to 3.34%. Mortgages are better by .125% to .25%.

Market commentary

New home sales rebounded in March after a dismal February, however, by all indicators this market has a long way to go on the road to recovery. The main focus for the markets this week will be the two day Fed meeting, which ends Wednesday. In addition to the standard post meeting policy statement, the Fed will also hold a press conference. It would be surprising if the financial media questions did not focus on the decline of the dollar, rising oil prices, or how QE2 might be responsible for commodity price increases.

In addition to the Fed meeting, the U.S. Treasury will auction, 2 year, 5 year, and 7 year notes, Tuesday, Wednesday, and Thursday, respectively. In front of the Fed meeting and debt auctions, bond prices are moving higher, pushing yields lower. The yield on the 10 year note has fallen to 3.65%.

Market commentary

Treasuries and mortgages closed weaker on Thursday, with the bond market closing early and all U.S. markets closed today.

Next week is a full economic calendar, a two day Fed meeting and more U.S. debt auctions of 2 year, 5 year and 7 year notes. The markets will be intently focused on Wednesday’s post meeting Fed announcement and the possibility of an early end to the Fed buying of U.S. Treasuries.

HSOA is open for business today, and the HSOA lock desk will be accepting locks until 12 noon, Pacific Time.

Market commentary

Mixed economic data this morning beginning with Initial jobless claims for the week ending April 16 falling from 416,000 the prior week to 403,000, remaining stubbornly above the 400,000 level. The four-week moving average is now up to 399,000.

The Philadelphia Fed reported is regional manufacturing activity index continued to grow in April but at a slower pace than last month. The index of current activity decreased to 18.5 from 43.4 in March.

And finally the Conference Board’s index of leading indicators rose 0.5% in March, the ninth consecutive monthly increase. This index suggests the U.S. economy will maintain growth for the next three to six months.

Mortgage bonds closed slightly lower on Wednesday; however, prices have improved this morning, so pricing is flat to Wednesday.

Market commentary

Purchases of existing homes increased 3.7% in March, however, this failed to make up for the found lost in February. Gold is now trading above $1,500 an ounce as global concerns about monetary stability and economic growth mount. Crude oil is nearing $110 per barrel again this morning and Treasuries are slightly lower from the close on Tuesday.

Market commentary

Economic data this morning came from the Commerce Department reporting building permits rose 11.2% in March driven by a 25% jump in multi-family starts. Housing starts, the next phase in the construction cycle, rose 7.2% in March, but remember they fell 18% in February. New home sales are languishing as many folks opt for the distressed prices of foreclosed homes or short sales.

Monday’s news that Standard & Poors place a negative watch on U.S. debt surprised the markets, causing treasuries to rise in yield and pushing stocks lower. This morning U.S. stock indices are slightly positive while treasuries have recovered all of Monday’s losses. I view this as good news and bad news. It is good news that interest rates remain low, especially for those of us involved in the mortgage industry; however, the President and Congress are not likely to take S&P’s downgrade seriously and make the tough decisions if interest rates remain at these levels.

After rebounding Monday afternoon, mortgage bonds are trading flat from Monday’s market close.

Market commentary

For months economists, analysts, investors and the markets were focused on the mounting sovereign debt fears in Europe. Today, however, the beginnings of those tremblings came to U.S. shores as Standard & Poors put a “negative” outlook on the AAA rating U.S. debt currently enjoys. In the words of S&P: “We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium and long-term budgetary challenges by 2013. “If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.” U.S. stock and bond markets sold off on the S&P announcement with the DOW trading lower by 200 points. The U.S. Treasury market relinquished its early morning gains and continues to trade lower. The economic calendar is light this week and it is a short week as the markets are closed for Good Friday.

Market commentary

Consumer prices for March came in pretty much in line with expectations with, headline inflation rising 0.5% and core prices, excluding food and energy, rising 0.1%, slightly less than expected. Almost all of the inflation in March’s report came from energy prices, up 3.5% month over month, and gasoline prices, up 5.6% month over month. If you are wondering what is causing the rally in the U.S. Treasury market, the reason quoted this morning is that the most likely outcome from the budget debate is a reduction in government spending. We will see if that reduction is sufficient to sustain these low yields. For today, enjoy the fact that mortgage pricing is .375% to .50% better from Thursday’s close.

Market commentary

Not so good news from the employment front this morning as Initial jobless claims for last week rose from 385,000 to 412,000. The four-week moving average jumped to 396,000. Only three of the last ten jobless claims reports have been above 400k, the typical hurdle rate for most analysts which indicates an expanding or contracting labor market. Producer prices for the month of March were mixed this morning with the headline price rising 0.7% slightly less than expected and core prices rising 0.3%, slightly more than expected. As one would expect, the biggest increase in prices were overall energy costs, with gasoline prices leading the charge, rising 5.7%. The Treasury market rallied Wednesday in spite of a week 10 year note auction. Today the U.S. Treasury will auction $13 billion in 30-year bonds. Mortgage prices are slightly better today.

Market commentary

Depending on which analyst or economist one listens to, the Retail Sales data today was great or it was a disappointment. The actual data for March reflected an increase in sales of 0.4% following 1.1% growth in February. Excluding autos and gasoline, sales increased 0.6%. If you are interested, gasoline sales rose 2.6% and accounted for the biggest gain in the subcomponents of the data. Not that folks were driving more, just paying more. Coming as no surprise to anyone in the mortgage industry, mortgage applications dropped 6.7% for the week ending April 8, 2011, as mortgage rates increased and the new compensation plans took effect. JP Morgan kicked off the earnings reports for the first quarter with net income of $5.56 billion, a 67% increase driven by a decline in provisions for mortgage and credit card losses. As of this writing U.S. stock and bond markets are trading flat to the close on Tuesday.

Market commentary

Today’s market moves tell us how fickle markets can be. For several weeks stocks seemed to be ignoring the looming nuclear crisis in Japan and the toll high oil and commodity prices would eventually take on the economy. Today, however, both are of concern and we see investors selling stocks and buying Treasury bonds. While one day does not portend a shift in sentiment, it is a wake up call. Keep in mind the U.S. Treasury is auctioning $32 billion of 3 year notes today, so we will see how the bond rally fares when the results of that auction are announced. The yield on the 10 year note has fallen from 3.59% to 3.50% and mortgage bond prices have improved to the levels they began Monday morning, so you should see pricing flat from Monday.

Market commentary

This week’s economic calendar is full including inflation data in the form of the Producer and Consumer Price Indices, Retail Sales, the Fed’s Beige Book, and consumer confidence. If the data were not enough the U.S. Treasury is scheduled to auction $32 billion in 3 year notes, $21 billion in 10 year notes, and $13 billion in 30 bonds. The week also begins where last week left off, with the sovereign debt crisis in Europe, conflicts in the Middle East, the continued saga in Japan and oil prices north of $111 per barrel. Mortgage prices are slightly improved from Friday and the yield on the 10 year note is trading at 3.59%.

Market commentary

This morning, bond prices are a bit lower, pushing the yield on the 10 year note to 3.59%, its highest yield since February. Regarding the economy, there are two major stories today – oil and the budget showdown. Oil jumped to over $110 per barrel on Thursday and is nearing $112 per barrel this morning, which places oil at its highest level since September 2008 and 32% above its one-year average. In Washington, the budget stalemate continues with multiple trips to the White House by Congressional leaders seeming to narrow gaps but not bridge it. This morning it remains unclear whether a deal will be reached between House Republicans, Senate Democrats, and the White House. Lenders are busy researching and publishing information on how a government shut down will affect certain aspects of the mortgage business. The processing of 4506-Ts, the ability to insure FHA loans, and obtaining new commitments for USDA Rural housing are among the services that will be impacted. According to Politico, past government shutdowns (there have been 18 since 1977) have produced more news and drama than actual market and economic impact.

Marekt commentary

The weekly jobless claim figures continue to give positive indications about the labor market, with initial claims for last week falling 10,000 to 382,000. The four week moving average, which reduces the weekly volatility, also fell to a reading of 389,000. News from Europe is not as positive as Portugal caves and asks the ECB for a bailout, and in an effort to fight inflation the European Central Bank raised its key lending rate by .25% to 1.25%. Back in the U.S. oil remains above $108 per barrel and our elected leaders struggle to reach a budget accord. Interest rates continued their ascent on Wednesday with the yield on the 10 year note rising to 3.55%. Bonds have opened flat this morning, however, after Wednesday’s declines mortgage prices are worse by approximately .25%.

Market cmmentary

Mortgage applications fell 2.0% for the week ending April 1, however, on a positive note, the Mortgage Bankers Assn. reported purchase applications rose 6.7% while applications for refinance fell. There are no more economic releases scheduled for today. Interest rates are on the rise again with the yield on the 10 year note reaching 3.51% this morning. Mortgage bonds continue to falter and are approximately .375% to .50% worse in price from Tuesday morning. Gold reached an all-time high this morning at $1,459 per ounce and oil remains above $108 per barrel. Economists are beginning to take note that fuel prices are taking a bite out of consumer spending; spending on things other than gasoline that is. A number of economic forecasts for the second half of 2011 are being lowered, putting the Fed between in a difficult position.

Market commentary

The ISM non-manufacturing index for the month of March fell from 59.7 to 57.3, below expectations. While the non-manufacturing report is not as strong as the manufacturing report, it remains a positive indicator for economic growth despite falling a bit from February. The current level of activity is consistent with GDP growth in the 3.5% range. The Bank of China raised interest rates for the fourth time since the global financial crisis ended, raising their one-year lending rate from 6.06% to 6.31% and the one-year deposit rate from 3.00% to 3.25%. The move comes before the monthly release of inflation in China, which grew last month at 5.2%. While we are discussing inflation, according to a Bloomberg article, “Federal Reserve Chairman Bernanke said he expects an increase in commodity prices to create a `transitory` boost in U.S. inflation”. I guess that is Fed speak for don’t worry about higher energy and food prices for now because they will eventually go away. In the interim, that does not bode well for the average American, of which I am one. Market reactions to this data and news are mixed. U.S. stocks are in positive territory while bonds are worsening. The yield on the 10 year note has risen to 3.48%, up from 3.42% at the close on Monday.

Market commentary

This week has a decidedly slower economic calendar with the most significant releases will being the ISM non-manufacturing report (Tuesday), and wholesale inventories (Friday). Analysts expect the ISM data will show a leveling off in the services sector with a slight increase in the index from 59.7 to 59.9. Tuesday the Fed will release the minutes from its March 15th FOMC meeting. The minutes will be scoured to find any hints of dissention on continuing QE2 to its scheduled conclusion in June. There numerous Fed speakers last week and several of them have indicated a willingness to at least give serious debate to cutting the pro-gram off $100 billion short. However, Fed Chairman Bernanke and several key FOMC members are still fully on board, so it appears unlikely they will stop the QE2 purchases early. This morning we see positive moves in both stocks and bonds, with mortgages approximately .25% better from the close on Friday.

Market commentary

Nonfarm payrolls grew by 216k in March, slightly exceeding expectations. The growth included 230,000 private payrolls and a loss of 14,000 government jobs. The biggest gains came in service-related jobs which grew 199,000 on the month. Manufacturing added 17,000 jobs, marking the fifth straight month of manufacturing job gains. In reaction to the data bonds sold off slightly with the 10-year trading from 3.49% to 3.52% immediately following the release. The stock markets liked this data and are moving higher. In a no “April Fools” joke, there has been a temporary stay in the new loan officer compensation rules until a hearing on April 5, 2011. As a result Home Savings of America will continue to operate under the pre-April 1 rules until further notice.