Market commentary

U.S. stocks had a stellar day Tuesday to the detriment of the bond market. Yields rose across the board with the 10 year rising 12 basis points to close at 1.92%---it is trading at 1.94% this morning.

Another report showing improvement in the housing sector came from the National Association of Realtors telling us existing home sales rose 4.0% in October. This on the heels of Tuesday’s increase in housing starts and building permits.

Europe is back in the news as the ECB offered banks 490 billion Euros in loans in continued efforts to provide liquidity and ease the fears of a credit crunch. This helped provide a short-lived stimulus to the markets; however, as of this writing U.S. stocks are in the process of giving back some of Tuesday’s gains while Treasuries have risen slightly. Mortgage prices are worse by .125%.

Market commentary

Strong data today from the housing sector has U.S. stocks rocketing higher this morning. Housing starts jumped to 685,000 and building permits were up 5.7%, both exceeding forecasts. Multi family units were the majority of the improvement, which in time should ease the pressure on rents.

Dysfunction is again making headlines in Washington D.C. as lawmakers haggle over the extension of the payroll tax cut time (whether it should be extended temporarily for 2 months or for 18 months) and other issues. Again, a lack of leadership which could bring the government to a halt by the end of the year.

After a nice rally Monday bond prices are sharply lower pushing yields higher. After closing at 1.81% the 10 year note is trading at 1.90% this morning. Still on tap for today is a $24 billion auction of 7 year notes by the U.S. Treasury.

Maarket commentary

Monday morning and no economic data releases scheduled for today. The Asian stock markets were nervous overnight on the news of North Korea’s Kim Jong Il, and the markets are also digesting the credit downgrades of several European countries. U.S. Treasury prices are flat to Friday’s close as are mortgages. The yield on the 10 year note is trading at 1.85%, the previous low yield in the midst of the Euro crisis.

Market commentary

In today’s only economic release, consumer prices for the month of November were flat month over month, bringing the headline year-over-year rate of inflation down to 3.4%. At the core level, excluding food and energy, prices increased slightly more than expected, rising 0.2%. As the government measures it, inflation is slightly higher than policy makers prefer, however, the Fed still believes at current levels of inflation they will have the tools to continue economic stimulus.

There is still no solution in sight to the European financial crisis, and therefore, U.S. bond prices remain strong with the yield on the 10 year trading at 1.88%. Mortgage spreads have widened this morning so pricing remains flat from Thursday.

Market commentary

A full calendar on the economic front today begins with the Producer Price Index. The PPI came in slightly higher than expected, rising 0.3% month over month in November, and was driven mostly by higher food costs. The core PPI (excluding food and energy) rose only 0.1%.

The New York Fed manufacturing index rose much more than expected from 0.61 to 9.53 with the underlying employment and new orders indices both rose from negative to positive range.

Finally, initial jobless claims for the week ending December 10 dropped dramatically from 385,000 to 366,000, the lowest reading since 2008.

Bond prices have been on fire this week on more concern about Europe. The 10 year Treasury yield dropped to 1.86% overnight, however, after the morning’s positive economic releases, has risen back up to 1.94%. Mortgages are flat to a few basis points worse in price from Wednesday.

Market commentary

Treasuries rallied Tuesday as the markets expressed displeasure with the results of EU financial summit. As investors moved to the safety of U.S. Treasuries there was strong demand for the 10 year note auction, pushing the yield down to 1.97%. In addition to the disappointment in the EU summit, the Fed announced it will continue to be in an accommodative position, likely keeping rates at near zero through mid-2013. Stocks turned negative after the statement was released as a handful of analysts were expecting the Fed to hint at a new round of quantitative easing.

This morning U.S. stocks are again trading in negative territory and Treasury prices are moving higher. The yield on the 10 year note has fallen to 1.925% and mortgage prices are better by .25%.

Market commentary

The markets gave their opinion on the “grand bargain” from last Friday’s European Union Summit yesterday with stocks dropping and bond prices rising. All of the major European stock markets closed broadly lower, as did the U.S. markets.

This morning we saw a somewhat disappointing report on retail sales for the month of November, which were up 0.2%, while expectations were for an increase 0.6%. Inside the report we saw electronics sales were up 2.1%, but building material sales fell 0.3% and food/beverage sales were down 0.2%. It appears that consumers have shifted to holiday purchases and have shifted away from other categories of spending.

Today is day two of this week’s Treasury auctions with an offering of $21 billion of 10 year notes. Given the turmoil in Europe expectations are for demand to be fairly strong. Wednesday the Treasury will auction $13 billion of 30 year bonds.

The Fed’s final meeting of 2011 is today with an official Statement being released at 11:15 p.m. PT. It is expected the Fed will not change their policy positions at this meeting, with the tone of the economic assessment to be slightly improved.

Mortgages are following Treasuries lower today with pricing worse by .25% to .375%.