Market commentary

This week is heavy with economic data and the headline number will be Friday's jobs report. Given the weaker economic data presented the past few weeks economists have lowered job growth expectations to below 200,000 to approximately 180,000.

This morning the S&P CaseShiller Home Price Index reflected housing prices in the 20 MSAs measured are down 3.61% year over year. This tells us home prices have yet to find a bottom, with Seattle and Washington D.C. the only areas with stability.

A regional economic report, the Chicago Purchasing Managers Index, fell sharply from 67.6 in April to 56.6 in May, reflecting a weakening manufacturing sector as consupmtion slows.

U.S. stock markets began the day sharply higher, but have since given back half of their gains on the weak economic data. The weak data had the opposite effect on U.S. Treasuries as the yield on the 10 year note began the day at 3.09% and has since fallen to 3.06%.

Market commentary

Personal income and spending both rose 0.4% in April, although after inflation the two are essentially flat. This continues the string of weak economic data that has pushed interest rates lower, and the weak economic data will be a challenge for the Fed as we near the end of the second round of quantitative easing.

This morning the yield on the 10 year note is hovering at 3.06%, unchanged from the close on Thursday. Keep in mind the bond market will close early today; 2:00 PM, ET, however, the HSOA lock desk will maintain normal hours, accepting locks until 4:00 PM, PT.

As we approach the Memorial Day holiday, we pay our respects to those who have given their lives on behalf of our country, as well as saying thank you to those families who have lost loved ones.

Enjoy your long weekend!

Market commetnary

Weak economic data has interest rates falling this morning, pushing the yield on the 10 year note to 3.08%. GDP for the first quarter came in unchaged at 1.8% despite expectations for growth to be revised upwards to 2.2% to 2.6%.

In addition to GDP, initial jobless claims rose to 424,000 last week, and were revised higher for the previous week. Weekly jobless claims above the 400,000 per week level point to a weakening labor market, and will lower expectations for the jobs report due out Friday, June 3.

Mortgages are benefiting from the improvement in Treasury prices and are approximately .25% better from Wednesday.

Market commentary

Durable goods orders for the month of April fell 3.6%, the steepest decline since October 2010. Reviewing the analysis the main culprits were a decline in aircraft orders, auto sales, and a supply disruption resulting from the earthquake in Japan. Durable goods orders are a key indicator of investment in equipment in the quarterly GDP reports.

The weak economic data has had little effect on the markets this morning with stocks slightly higher and bonds trending lower. Later today the U.S. Treaury will auction $35 billion of 5 year notes, even though the U.S. has technically reached its debt ceiling.

Mortgage pricing has improved from Tuesday by .125% to .25%.

Market commentary

New home sales rose 7.3% in April, a positive number, however, the actual pace of activity is anemeic. New home sales are competing with the supply and price discounts of exisiting homes, so it seems it will be some time before new housing activity will be a significant contributor to GDP.

The drama surrounding the debt crisis in several European countries continues to be a significant distraction for investors as well as a catalyst for flight to quality. U.S. Treasuries were the main beneficiaries on Monday, although prices retreated at the market close. Even though bonds are flat this morning, the lower close on Monday has mortgage pricing worse today by .125% to .25%.

Market commentary

With no major economic releases today the markets are fosusing once again on the renewed sovereign debt issues and the Euro zone's ability to manage them. Greek debt was pushed further into junk status by Fitch on Friday, and S&P dropped the rating on Italy from stable to negative. In today's trading the Euro is declining against most major currencies, and global stock markets, including the U.S., are falling. We are seeing a flight to safety rally in the U.S. dollar and Treasuries, which is also helping the mortgage market. Pricing on mortgages has improved approximately .25% from Friday.

Market commentary

Weaker than expected reports on exisging home sales and the Philadelphia Fed Index gave bonds a boost Thursday afternoon, pushing the yield on the 10 year note down to 3.16% from over 3.20% early Thursday morning. According to the National Association of Realtors the drop in home sales is the result of unnecessarily tight lending standards and low appraisals. I do not think that is a real news flash and will probably only get worse with the continued implementation of regulations and the rise of the Consumer Finance Protection Bureau.

For today, pricing on mortgages is flat from the price improvement late Thursday afternoon.

Market commentary

Inital jobless claims for last week fell 25,000 to 409,000, however, initial claims have come in above 400,000 for six consecutive weeks. This is the historical hurdle rate indicating an expanding or contracting labor market.

The index of leading economic indiacators fell 0.3% in April, the first decline in 10 months. The leading indicators index was depressed by a pickup in jobless claims. Recall that is index is a gauge of where the U.S. economy will be in the next 3 to 6 months.

Wednesday the FOMC released the minutes from their April 26-27 meeting and the biggest news from the minutes was an extensive discussion of exit strategy. The mintues noted that just because they are discussing exit strategies, this does not imply that they are about to begin changing policy stance. The FOMC mostly agreed to a general course of action that would include "ending the cashflow reinvestments of agency-backed holdings, ending reinvestment of Treasury maturities, removing the "extended period" language, raising the overnight target rate, and the selling assets from the portfolio over a five year period".

Bonds sold off Wednesday afternoon as a result of the information released in the FOMC minutes, and in spite of weak economic data this morning, the trend to higher rates continues. The yield on the 10 year note is now at 3.205% and mortgage prices are 25 bps to 30 bps worse than Wednesday.

Market commentary

Mortgage applications rose 7.8% for the week ending May 13, driven by a 13.2% jump in refinance applications. As a continued signe of weakness in the housing market, purchase applications fell 3.2%. The only remianing economic data for today will be the release of the minutes from the last FOMC meeting.

Treasuries are giving back some of Tuesday's gains lifting the yield on the 10 year note from 3.10% to 3.15%. Pricing for mortgage is worse by approximately .25%.

Market commentary

This morning's data on the housing sector tells us we have not yet reached the end of the "housing bust". Housing Starts for April fell 10.6% while analysts had forecast a gain of 3.6%. Hosing Permits fell 4.0%, ignoring the expectation that had veen for a gain of 0.9%.


Industrial Production was uncahnged in April after having increased 0.7% in March, and capacity utilization edged down 0.1% to 76.9%. This rate is 3.50% lower than the average from 1972 to 2010. This data may seem mundane, however, it reflects considerable excess capacity in the manufacturing sector. Or stated in another way, fewer manufacturing jobs available.


U.S. stock and bond markets are reacting to the day's weak economic reports as one would expect. Stocks are trading lower while bond prices are rising; recall that inverse relationship that as bond prices rise, interest rates decline. The yield on the 10 year note has fallen from 3.16% at the close on Monday to its current level of 3.10%.

Market commentary

This week’s economic calendar is light with April industrial production and capacity utilization, housing data, and the Leading Economic Indicators Index. The minutes of the Fed’s April meeting will be released on Wednesday, however, given the post-meeting press conference, it seems unlikely the minutes will produce any surprises.

Treasuries are coming into the week on a roll following several strong weeks of trading with the yield on the 10 year note has falling to 3.17%. Some analysts believe treasuries over-bought and due for a correction, however, as economic growth appears to be slowing we may see bonds stabilize at current levels. Even though treasury prices are flat this morning, mortgage bonds are declining so you will see pricing .125% to .25% worse than Friday.

Some good news on the energy front as oil prices give ground trading below $100 per barrel. Let’s hope this becomes a trend.

Market commentary

Consumer prices rose 0.4% in April, bringing the year over year rate of price increases to 3.2%. The majority of price increases are coming from energy related prices as the core index rose only 0.2%. Gasoline costs rose 3.3%, the largest increase of any of the Consumer Price Index subcomponents. The bond market does not seem to be concerned at this point because so much of the inflation is coming from higher oil prices.

Thursday’s retail sales data reflected consumers were pulling back on spending, however, according to the Thomson Reuters/University of Michigan survey released this morning, the consumer sentiment index rose to 72.4, a three-month high, from reading of 69.8 in April.

After Thursday’s sell off in bonds, the see-saw market action continues as bond yields are falling this morning and U.S. stock markets are in retreat. Mortgage prices are slightly improved.

Market commentary

Initial jobless claims fell from 478,000 to 434,000 for the week ending May 7, an improvement, however, claims remain stubbornly above the 400,000 mark.

Producer prices rose more than expected coming in up 6.8% year over year. However, excluding food and energy the producer prices for April only rose 2.1%. This shows us that the rise in food and energy prices have been larger than expected by economists and are having a bigger impact on the price reports.

The impact of higher food and energy prices on the consumer was evident is today’s retail sales report. The headline retail sales figure came in at 0.5% versus expectations of 0.6%. However, when stripping out the contribution of autos and gas, retail sales only rose 0.2% in April.
The bottom line of the reports we are seeing now is that the increased oil prices, along with food prices to a smaller degree, are creating more headline inflation than anticipated and cutting into consumption more than expected.

U.S. stock indices are lower after the stronger than expected inflation data and bond prices are flat, which is an interesting phenomenon. Normally, one would expect bonds to react negatively to reports of higher inflation.

Market commentary

U.S. Treasury and mortgage bond prices sank Monday afternoon on a less than stellar 3 year note auction. This afternoon, $24 billion of 10 year notes will be offered for auction as we have seen the yield on the 10 year note rise from 3.15% to 3.22% in the last two trading days.

U.S. stock markets are weaker this morning after the U.S. reported the March trade deficit widened. While the weak U.S. dollar has pushed exports to near record levels, growth in oil imports and the cost of oil more than offset the exports.

Mortgage prices are approximately .25% worse from Tuesday’s mid-day change.

Market commentary

An often overlooked inflation metric is the Import Price Index, which contains data on changes in the prices of goods and services imported into the U.S. Today this index was reported to have increased 2.2% in April, following a 2.6% increase in March. I am sure you have already guessed the main drivers of the increase in the index are higher oil and food prices. Fuel import prices have increase 37% year over year while food prices have increased 20% year over year. Excluding fuel, import prices rose 4.3%. Later this week we will see inflation data as measured by the Producer and Consumer Price indexes.

Other items of note this morning include the fact the Chinese yuan set an all-time high against the U.S. dollar, silver and oil prices are rebounding after last week’s shellacking, with oil back over $100/bbl, and the U.S. Treasury is bringing $32 billion of 3 year notes to auction later today.

Market commentary

There are no economic releases today and both stock and bond markets are opening flat. After last week’s steep sell-off oil, gold, sliver and most other commodities are rebounding, with oil just below $100/bbl. This week has a fairly busy economic calendar including Retail Sales and two inflation measures; the Producer Price Index and the Consumer Price Index. The markets will be looking for the effects higher food and energy prices are having at the consumer level.

The sovereign debt crisis in Europe shows no sign of fading, as European Union officials had an unannounced, emergency meeting on Friday to discuss the growing Greek dilemma. Greece is no longer able to reasonably access the capital markets; not a good thing when one has maturing debt that needs rolled over and the need to borrower additional funds to help run the country. This may not be limited to Greece and Ireland, Portugal and Spain all continue to have problems.

As noted above, U.S. markets are flat from the close on Friday, with the yield on the 10 year note firm at 3.15%, and mortgage prices unchanged.

Total nonfarm payrolls rose 244,000 in April on a 268,000 increase in private sector jobs and a 24,000 decline in government jobs. This report surprised the markets and many economists who had recently lowered expectations of job growth based on weaker employment data from several private economic reports and the substantial increase in the weekly jobless claims.

The household survey was less optimistic with the unemployment rate rising to 9.00% from 8.80%. Also, with job growth at 250,000 plus per month, it will take 2 ½ years to absorb the 13 million plus folks who lost their jobs in the past 3 years.

Major news came from the commodity markets Thursday, as many commodities took a severe beating, especially silver. It seems the freefall in silver sparked margin calls, which exacerbated the selling and spilled over into gold, oil and other commodities. Oil closed below $100 per barrel Thursday; however, it has rebounded to $102 per barrel this morning.

U.S. stock markets are in rally mode after the stronger than expected jobs data, and as one would expect, bonds are selling off, with the yield on the 10 year note rising to 3.20%. Mortgage prices are worse by .25% to .375%.

Market commentary

An ominous sign in for the employment picture as weekly jobless claims for the week ending April 30 rose to 474,000 from 431,000. Four consecutive reports over 400,000, in addition to consecutive drops in ISM employment readings and it looks as though the labor data may be coming into another soft-patch. The previously mentioned data places more emphasis on Friday’s jobs data with expectations for total payrolls to grow at 185,000 versus last month’s 200,000 gain in private payrolls, and a 15,000 loss in government payrolls.

The weak economic data has helped treasuries continue to rally this week with the yield on the10 year dropping from 3.26% to 3.22% yesterday and down to 3.18% this morning. Mortgage prices continue to improve as well, with pricing .125% to .25% better than Wednesday.

Market commentary

In front of Friday's non-farm jobs data, APD released its measure of job growth this morning, telling us payrolls grew 179,000. While a decent number, it was lower than expected and lower than the 207,000 number from last month.

With another sign of a slowing economy, the Institute for Supply Management index of non-manufacturing companies slumped to 52.8 in April, the lowest since August, from 57.3 a month earlier.

After this morning's news U.S. stock markets are slumping with the DOW lower by almost 100 points while bonds continue to improve. The yield on the 10 year note has fallen to 3.22%.

The markets will now turn their focus almost entirely to Friday's jobs data.

Market commentary

Bond yields are falling again this morning as the U.S. dollar finds support and is moving higher against other major fiat currencies. Commodity prices are falling on the dollar gains, including gold, silver and oil, although all remain at elevated levels.

After Monday's initial euphoria in the U.S stock markets regarding the killing of Bin Laden, equities took a breather and ended lower on the day. Pre-market, U.S. stock futures are pointing to lower opening, which is pushing investors to less risk, aka, the U.S. Treasury market.

This will be another good day to take advantage of low mortgage rates.

Market coomentary

The news this morning that U.S. forces killed Osama Bin Laden is the overriding factor affecting markets today. Stocks are much higher, bonds are flat, and interestingly, silver seems to be the only commodity taking it on the chin. Oil prices remain elevated at over $112/bbl and gasoline prices seem entrenched north of $4.00/gal.

This morning's ISM report reflected a slowing in the U.S. manufacturing sector and don't forget, the first Friday of every month is the all important jobs report.

With the overwhelming focus this morning being the news of Bin Laden's death, we will have to wait until later in the week to see the effects of economic data.