Market commentary

The Fed will purchase between $4 and $5 billion in 5 to 7 year Treasuries today in its final QE2 purchases, and will continue to reinvest cashflows from its portfolio but will not be making anymore new money purchases.

For the week ending June 25, initial jobless claims came in at 428,000, down 1,000 from the previous week’s 429,000; however, expectations were for claims to fall to 420,000. Jobless claims are not easing as economists continue to project, reflecting a struggling economy that is unable to produce jobs.

Mortgage prices are worse this morning by .25% to .375%, but are still extremely low. 30 year fixed rate loans remain in the mid 4% range.

Market commentary

The flight to quality which has seen Treasuries rally for the past several weeks on Greek concerns is being undone. The yield on the 10 year note rose 11 basis points Tuesday and its yield is higher again this morning, currently trading at 3.09%. Treasury had another lackluster auction yesterday of 5 year notes which revealed weaker foreign demand; a concern particularly given the need for buyers to step in and fill the Fed’s role once QE2 concludes. This put additional pressure on bonds with the 5 year note taking the biggest beating yesterday, rising 15 points in yield. Keep in mind Treasury is auctioning 7 year notes today.

Stocks have had two stellar days and are higher again this morning, and oil prices have rebounded to now trade above their price level when the IEA and the U.S. announced the release of 60 million barrels of oil from reserves. Who did not see that coming?

Mortgage pricing is worse again today by approximately .125%.

Market commentary

Bonds had a bad day Monday, the result of a weak 2-year note auction. Immediately following the auction, which had weaker-than-normal demand from overseas buyers, the yield on the 10-year note rose from 2.88% to 2.92% and is opening this morning at 2.94%.

Greece is once again the focus of the markets as widespread protests against tax hikes and spending cuts show how tough a deal to bailout Greece will be. In addition to Greece, Italy and Spain are making news. In a little reported event, trading was halted last Friday in two of Italy’s largest banks.

Housing data this morning told us the spring buying season helped support prices in several areas, according to the S&P/CaseShiller price index. The May report reflects this, rising 0.7% month-over-month in May. However, after seasonal adjustments, prices fell 0.09%, telling a recovery in housing is somewhere in the future.

Maarket commentary

This week provides a full economic calendar and more debt auctions from the U.S. Treasury, beginning today with 2 year notes, followed by 5 year notes and 7 year notes, Tuesday and Wednesday, respectively.

This morning we saw data on personal income and spending which reflected stagnant consumer spending and slowing growth in personal incomes. The remainder of the week will give us data on housing prices and the health of the U.S. industrial sector.

Of course the Greek debt crisis remains front and center and is the main focus of markets again today. The fear of a global economic slowdown is growing resulting in stock market losses, falling commodity prices, including oil, and lower interest rates.

This morning U.S. Treasuries opened flat from the close on Friday, offering another opportunity to take advantage of low mortgage rates.

Market commentary

Durable goods orders for the month of May rose 1.9%, slightly more than the expected increase of 1.5%. Recall in April this report reflected a decline in orders of 2.7%. The positive number today reduces the growing concern that manufacturing is headed for a serious slowdown.

Thursday morning stocks opened down sharply creating a nice rally in U.S. Treasuries. The yield on the 10 year note fell below 2.90% in intraday trading and closed at 2.915%, while the DOW was lower by almost 200 points and closed down 60 points. Mortgage prices improved between .375% and .50%.

This morning stocks are again trading lower as are bonds. Mortgage pricing is slightly worse, however, at current interest rates this remains an exceptional time to purchase or refinance.

Market commentary

Fear is gripping the stock market this morning after initial jobless claims for the week ending June 18 came in at 429,000, 14,000 higher than expectations. This is the eleventh consecutive week that claims have been above 400,000, a bad sign for the labor market. Additionally, European Central Bank President Jean-Claude Trichet said earlier today that risk signals for financial stability in the euro zone are "flashing red" in response to the Greek crisis.

The FOMC meeting that concluded yesterday yielded some interesting comments from Fed Chairman Bernanke: 1) economic forecasts for 2011 and 2012 were downgraded and Bernanke said that at least part of the economic weakness was not temporary, 2) Bernanke said he could not explain the slowdown completely although part of it was attributable to Japan and oil prices,… Chairman Bernanke had very few answers for how to stimulate the housing market, and as one commentator wrote, “Chairman Bernanke seemed befuddled with the current economic situation”. One of the few certainties we can take from yesterday is that the Fed is nowhere near ready to raise their target funds rate.

I only wish these folks would ask me for my top three ideas for turning the U.S. economy around. I am sure my ideas are replicas of the thoughts many of you folks have.

For today, bond yields are falling, with the 10 year note now trading at 2.91%.

Market commentary

The markets are focused entirely on the FOMC (Fed) meeting which will conclude at 12:30 PM, ET, 9:30 AM, PT. This Fed meeting is ending earlier than usual as Chairman Benanke will once again host a post meeting news conference. U.S. stock markets are trading flat while bond prices have improved slightly. Mortgage prices have improved by .125% to .25%.

Market commentary

Existing Home Sales for May fell 3.8%, providing evidence low interest rates are not the only factor that drive home ownership. Tight credit markets, extreme and growing regulatory burdens, and job uncertainty are strong headwinds to the low interest rate environment. Details of the home sale report tell us 31% of sales were distressed sales, and at the current rate of sales there is a 9.3 month supply of homes.

The weak housing data’s effect on stock and bond markets was nil, as the markets continue to focus on a potential resolution to the Greek debt crisis. Optimism is high this morning that a deal is near, so stocks are higher and bond prices are lower. The yield on the 10 year note is hover just below 3% at 2.99%. Mortgage prices are worse by .125% to .25%.

The Fed begins its two day meeting today and the end of QE2 is in 9 days.

Market commentary

Sounding like a broken record (for those of you who remember records), the markets remain focused on Europe as the EU finance ministers have again delayed the decision to release $17 billion of bailout money to Greece. Until there is resolution this issue will dominate global markets. Here, in the U.S., the flight to the perceived safety of Treasuries continues to keep interest rates low, pushing the yield on the 10 year note to 2.94%.

Speaking of U.S. Treasuries and debt, we are now at 43 days and counting until the U.S. defaults on its debt. Unless of course, our leaders come to an agreement on raising the debt ceiling and reducing spending.

Dominating the economic calendar this week is the two day Fed meeting which will end Wednesday with the accompanying policy statement.

Market commentary

This morning, US bonds are lower and stock index futures nicely higher as Europe appears to be on the verge of a short-term resolution to the Greek crisis. Other economic data was mixed and had little impact on the markets, as the Univ. of Michigan/Reuters consumer sentiment index declined to 71.8 from 74.3 in May, while Leading Indicators index rose 0.8%. Recall the LEI fell 0.4% in April.

One should expect the see-saw trading and volatility in the markets until the debt crisis in Europe has a more permanent solution and if we continue to see mixed economic data in the U.S.
I will close by sharing part of a commentary from broker/dealer Vining Sparks, which commentary was referencing the European debt issues. “The often-discussed European Union bank stress tests will reportedly ignore the possibility of a Greek default. This raises a great question: If you’re standing in the woods and a tree falls on you, but your eyes are closed, would it really hurt you?”

Market commentary

Volatility has been high this week, particularly on Wednesday as we saw the 10 year note begin the day at a yield of 3.10% and end the day at 2.95%. This morning the rally in U.S Treasuries continues pushing the yield on the 10 year note to 2.89%.

New claims for jobless benefits last week were reported at 414,000, remaining stubbornly above the 400,000 number. Housing starts building permits rose more than forecast in May, but remain very weak, forecasting a long recovery for the housing market.

The markets remain focused on Europe and the sovereign debt crisis. Greece appears on the verge of default or bankruptcy and a resolution does not seem imminent. The turmoil in Europe will continue to drive volatility in both stock and bond markets worldwide.

Market commentary

This morning is a partial reversal of what the markets gave us Tuesday morning. Tuesday, as you recall, stocks rebounded sharply while bonds experienced a steep decline. This morning stocks are giving back most of Tuesday’s gains and bonds prices are improving. The yield on the 10 year note has fallen from 3.09% to 3.04% and mortgage prices are better by .125% to .25%.

Consumer prices for the month of May increased 0.2%, and 3.6% year over year. The year over year inflation rate is the highest headline inflation rate since October 2008. Subtracting food and energy prices, core inflation rose 0.3% and 1.5% year over year.

The Empire Manufacturing report plummeted in June from 11.88 to -7.79. While some other manufacturing indices have reflected weakening growth, this is the first sign of outright contraction in the sector. New orders dropped over 20 points, number of employees dropped 14 points, and the average workweek fell 25 points. These regional manufacturing reports can be volatile; however, in conjunction with this, the Fed reported Industrial Production in the U.S. rose a slight 0.1% in May. Again, this is a reflection of a slowing manufacturing sector.

Market commentary

Producer prices for the month of May rose only 0.2% versus 0.8% in April as higher oil prices receded a bit. Subtracting food and energy prices, the core PPI also rose 0.2%, bringing the year-over-year producer price index to plus 2.1%.

Retail sales for May were expected to have declined 0.4%, however, sales declined only 0.2% so this was taken as good news, and is what is driving the stock markets higher. If you are like me, noting that consumers are spending less should not be taken as a reason buy stocks, but markets and investors are rarely logical.

China raised its bank reserve requirements again overnight to try slowing the pace of inflation, which is currently running at 5.50%. At the same time the government ordered lenders to raise their cash reserves from 21.0% to 21.5% to restrain the rate of lending, and speculating.

And finally, S&P cut Greece’s rating from B to CCC and kept them on negative outlook Monday, citing the likelihood of default by the country. Greece is now the lowest rated sovereign credit by Standard & Poor’s; below Pakistan, Argentina, and Ecuador. The latter two have recently defaulted. Why should we care what happens in Greece may ask. Well, it turns out the lessons from AIG have not been learned well. Recall AIG was the counter-party on billions of dollars of credit default swaps---basically insuring the bond holders against losses. What has not been widely reported is that a few large U.S. banks are the counter-parties (aqua, the insurers) for billions of dollars of European debt, including Greece.

U.S. Treasuries are in full sell mode this morning as the stock market rallies. The yield on the 10 year note has risen to 3.09%, and mortgage prices are .375% to .50% worse from Monday’s market close.

Market commentary

There are no economic releases scheduled for today, however, the remainder of the week is data heavy including the Producer and Consumer Price indices, manufacturing reports, housing data, and a survey of consumer confidence.

This morning U.S. stocks are rebounding from last week’s declines, but the DOW remains below 12000. The yield on the 10 year note has pushed back through the 3% mark, currently trading at 3.01%. Mortgage prices are worse by .20% to .30%.

Market commentary

This morning bonds and stocks are reversing Thursday’s action, with the DOW sinking by 150 points as of this writing, and the yield on the 10 year note falling back to 2.95%. It seems investors are increasingly worried that global growth is slowing after data showed China’s export growth slowed in May, and as the resolution to the Greek debt crisis drags on.

Next week is a full economic calendar in the U.S., including the Producer and Consumer Price Indices, housing data, and various other economic reports.

Market commentary

Initial jobless claims for the week ending June 4 remained above 400,000 at 427,000, slightly higher than the previous week’s 426,000. This data coincides with information released in the Fed’s Beige book Wednesday afternoon, with mixed data from the 12 districts. The report stated “economic activity generally continued to expand, although a few districts indicated some deceleration”.

The Euro zone continues to fret over the potential of a bond default by Greece, and the European Central Bank this morning decided to leave its benchmark rate unchanged. The ECB signaled it may raise rates at the next meeting.

U.S. Treasuries and mortgages are flat from Wednesday’s close, with the yield on the 10 year note hovering in the 2.96% to 2.97% range, and U.S. stocks markets are higher after 6 days of losses.

Market commentary

Bond prices have moved higher; yields lower with no substantive economic data today. However, there are a few issues demanding the attention of the markets. OPEC could not agree on a deal to increase output so oil prices once again rose above $100/bbl; just when I was able to pay less than $4.00 for a gallon of gas.

In Europe, it appears Greece will technically default, or as the euphemism being used states, a selective default. Investors would be forced to swap existing debt for new bonds with extended terms.

If one thinks defaults on bond obligations are limited to “poorer” countries we may be in for a surprise. U.S. Republican lawmakers are considering allowing a brief default as a means to force deeper spending cuts as a condition to raising the U.S. debt ceiling. An adviser from China’s central bank commented this idea is “playing with fire”.

Later today the Fed will release its Beige Book survey of economic activity and the U.S. Treasury will auction $21 billion 10 year notes.

Kudos to JP Morgan CEO Jamie Dimon for his comments during the Q&A session after Fed Chairman Bernanke’s speech at the International Monetary Conference. As if speaking for all of us in the finance, banking and mortgage industry, Mr. Dimon began by reading a laundry list of changes that have already occurred, many of them dictated by the markets rather than by new laws or regulations. He then said, “Now we’re told there are going to be even higher capital requirements, and we know there are 300 rules coming, has anyone bothered to study the cumulative effect of these things and do you have a fear like I do that when we look back and look at them all, that they will be the reason that it took so long for our banks, our credit, our businesses, and most importantly, our job creation, start going again? Is this holding us back at this point?"

Market commentary

Economic data today is sparse with markets focused on the potential resolution of the Greek debt crisis, a speech by Fed Chairman Bernanke that will be delivered at the International Monetary Conference in Atlanta, and the U.S. Treasury's auction of $32 billion 3 year notes.

Having nothing concrete on which to focus, the stock and bond markets are range bound with limited volatility. The yield on the 10 year note has risen slightly to 3.04% and prices on mortgages are worse by approximately .125%.

Market commentary

This week's economic calendar is light with no data releases scheduled for today. Probably the two most important items this week are the Fed's Beige Book on Wednesday and initial jobless claims on Thursday.

For today stocks are trending lower as carry over from Friday's weak jobs data, and bonds yields have risen slightly. Mortgage prices are worse by approximately .125%.

Market commentary

The jobs data surprised even the most bearish economists with payrolls increasing by a nominal 54,000 in May while the jobless rate rose to 9.1%. The median forecast in a Bloomberg News survey called for payrolls to rise 165,000. Private hiring rose 83,000 while government payrolls shrank by 29,000; mostly state and local government jobs.

The market’s initial reaction was a steep decline in stocks and a rally in bonds, with the yield on the 10 year note falling to 2.95%.

The markets reversed course on the ISM non-manufacturing data, which reflected an 18th straight month of growth in U.S. service sector. Bonds gave back all of their gains after this data, with the yield on the 10 year note climbing above 3% to 3.02%, the level at which it closed Thursday. Mortgage pricing will be slightly better, approximately .10% to .20%.

Market commentary

Bonds were clear winners yesterday, putting in a strong rally on the weaker than expected economic reports. Assisting the bond rally was the steep decline in stocks, which shave 280 points off the DOW. The yield on the 10 year note broke through 3%, closing at 2.96%.

422,000 new jobless claims were filed last week, a number higher than estimates, and marking the eighth consecutive week claims have remained above the pivotal 400,000 mark. With Wedenday's weak ADP jobs report and continued high weekly jobless claims the estimates for Friday's payroll data have become increasinly uncertain. Some economists remain with previous forcasat of +175,000 while others have lowered their estimates to +105,000. This is clearly a broad range leaving much uncertainty about the data and how the markets will react.

This morning bonds are giving back some of Wednesday's gains, with the yield on the 10 year note rising to 2.99%. Mortgage pricing is worse by .10% to .20%.

Market commentary

Weak economic data this morning are crushing stocks and creating a nice rally in bonds. The yield on U.S. Treasuries is lower across the curve, with the 10 year note falling to 2.975%! Mortgage prices have improved by .375% to .50% from the close on Tuesday.

ADP surprised the markets by reporting only 38,000 new jobs were created in May, well below the expectation of 175,000. The ADP report does not always track the Labor Department's data, which we will see Friday morning, however, it is an ominous sign given the weak data reports of the past few weeks.

In addition to ADP the Institute for Supply Management's business activity index for May came in at 53.5 versus the April reading of 60.4. While a number above 50 indicates continuing expansion in the manufacturing sector, momentum has definitely slowed.

The decrease in interest rates in giving home buyers and existing home owners another great opportunity to lock in a 30 year fixed rate at 4.5% or lower. Now is the time to take advantage of low interes rates in conjunction with the new, expanded guideline, product offerings from Home Savings! Contact your HSOA Community Banker for all of the details!