Market commentary

This morning we were told personal income rose 0.4% in December, however, personal spending rose 0.7%, more than expected. Of course, with spending growing at a faster pace than incomes rose, the savings rate fell to 5.3% in December.

The markets have calmed despite the continued unrest in Egypt, with U.S. Treasury and mortgage prices flat from the close on Friday, and stocks trading slightly positive. The remainder of the week will provide substantial economic data as the calendar is full, culminating with Friday’s jobs report.

Market commentary

The U.S. economy, as measured by GDP, grew at a 3.2% in the fourth quarter, a faster pace than the third quarter’s 2.6% growth rate, but below the forecast of a 3.5% rate of growth. The positive signs in the report were personal consumption rose from 2.4% to 4.4% in the quarter driven by purchases of durable goods which rose a strong 21.6%. The Core PCE price index (an inflation measure favored by the Fed) continued its slowing trend falling to a 0.4% rate of increase in prices, the lowest rate of growth in the PCE price index on record.

In the final economic data release for the week, the Thomson Reuters/University of Michigan index consumer sentiment decreased slightly to 74.2 from 74.5.

As the GDP data was “old” news in the sense that it is backward looking, the markets are reacting today to weaker than expected earnings from Ford, GM and Microsoft. U.S. stocks are lower and we see a modest improvement in bonds.

Market commentary

Standard and Poor’s cut Japan’s sovereign debt rating today to AA-, the fourth highest rating S & P grants, putting Japan on par with China. In a warning that should get the attention of wealthy governments around the globe, fiscal responsibility is becoming a focus.

This morning the volatility in weekly jobless claims continues to complicate interpretations. Weekly claims rose to 454,000 in the most recent week, their highest level since October, and the four-week average rose to a seven week high.

The National Assn. of Realtors told us this morning that pending home resales rose 2% in December, which is a bit of good news for the residential real estate market.

Given the downgrade of Japan’s debt and the large increase in jobless claims one could have expected U.S. Treasuries to improve in price, however, the bond market is flat from the close on Wednesday as are mortgage prices.

Market commentary

Bonds are weaker this morning with the 10-year trading at 3.395% after dropping to as low as 3.31% Tuesday afternoon. New home sales for the month of December rose 17.5% month over month as many homebuyers jumped off the fence as they saw interest rates increasing. Almost all of the increase in home sales came in the West region. For all of 2010, new home sales fell 14% to 321,000 versus 2009 levels, and remain at depressed levels.
The Fed will end its two-day FOMC meeting today and makes its official rate announcement at 2:15 pm ET. All eyes will be on the details of the text today to see any nuances in the wording from the December statement given the four new voting members this year.

The markets have been unfazed by the President’s State of the Union address last night given that it was largely as-expected and lacking in details. Stocks are flat, Treasuries have given back much of Tuesday’s improvement, and mortgage pricing is about where it was Tuesday morning.

Market commentary

The U.S. housing market continues its struggle with value. This morning the S&P CaseShiller Home Price Index for November reflected more weakness in home prices. The 20 MSA index fell 0.97% month over month in November with the majority of metropolitan areas dropping more than 1.00%. Prices are 1.59% lower in November versus year ago levels.
An economic data bright spot came from the Conference Board, as they reported their index of consumer sentiment increased to 60.6 from 53.3 the prior month.
Recall that today begins the FOMC’s (Federal Reserve) first meeting of 2011, and their rate decision with the accompanying announcement is expected to be announced tomorrow at 2:15 pm ET.
Finally, the U.S. Treasury auctions 2 year notes today, with the results of the auction available at approximately 1:00 PM, ET.

Bond prices are slightly improved from the close on Monday, with mortgage pricing better by slightly less than .125%.

Market commentary

The U.S. bond market never recovered from Thursday’s positive economic data. Treasuries sold off throughout the day causing mortgage lenders to worsen pricing mid-day, and treasuries are slightly lower again this morning.

There was no economic data this morning, however, the markets did see better than expected earnings from GE and an unexpected loss from Bank of America.

Mortgage prices are a few basis points worse from the mid-day price change on Thursday.

Next week begins a two day Fed meeting with their announcement on Wednesday, a full economic data calendar, and the U.S. Treasury will auction 2 year, 5 year and 7 year notes.

Market commentary

Today’s economic data support the idea of a slowly recovering economy. Initial jobless claims fell back from the previous week’s elevated 441,000 to 404,000, Leading Indicators rose 1.00% after a 1.1% gain in November and Philadelphia Fed’s manufacturing index held steady.


The jobless claims report created some selling pressure on Treasuries and the 10-year note traded from 3.35% before the announcement to 3.40% shortly afterwards. The 10 year note is currently trading at 3.41%. Mortgages have given back all of Wednesday’s gains with pricing .255 to .375% worse from the mid-day improvement.