Daily Market Update 5/30/08

Rates improved following this morning's release of the April Core PCE price index, the Fed's preferred inflation indicator, showing an annual increase of 2.1%. Although the Fed would like to see this level fall below 2%, the data was in line with expectations. Even with today's gains, the mortgage-backed securities market has seen a rough week, with rates having risen about 1/4% since Monday. Yesterday, Dallas Fed President Richard Fisher commented that if the inflation outlook continues to worsen he expects a change in monetary policy will occur "sooner rather than later". Futures on the Chicago Board of Trade now show a 31% chance the Central Bank will raise the target Fed Funds rate by at least 1/4% in September. Ultimately, a hawkish attitude on inflation by the Fed will benefit the market by holding down long-term fixed rates, since inflation erodes the value of fixed rate securities.

Daily Market Update 5/29/08

Mortgage rates continued their upward trend Thursday as first quarter Gross Domestic Product (GDP), a key measure of economic growth, was revised higher. Investor sentiment has shifted in recent days, as inflationary fears have increased while concerns about a severe economic contraction have receded. Most forecasters are now expecting the next Fed move to be an increase in rates later this year. Crude oil prices moved higher on a report showing an unexpected decline in oil and gas inventories. Focus now turns to tomorrow's Department of Commerce release of the Core PCE, which measures price changes in consumer goods and services and is watched closely by the Fed.

Daily Market Update 5/28/08

Mortgage rates moved higher Wednesday as Durable Goods Orders for April were better than expected. Oil prices slid below $128 a barrel; stock prices and the US Dollar were higher. Mortgage-backed securities investors remain focused on signs of increasing inflation in spite of general weakness in the economy. Lingering concerns about "stagflation", the term coined in the late 1970's describing slow economic growth coupled with high inflation, are currently preventing any sustained improvement in long term interest rates.

Daily Market Update 5/27/08

Mortgage rates inched higher Tuesday on global inflationary fears. In economic news, the Standard & Poors/Case-Shiller Home Prices Index showed a 14.1% decline in home prices for the first quarter of 2008 compared the same period a year earlier. New home sales increased unexpectedly by 3.3% in April from March but were down 42% from April 2007. Oil dipped below $130 a barrel and the US Dollar was higher. Investors now await Wednesday's report on Durable Goods Orders and Friday's release of the Core CPE, a key gauge used by the Federal Reserve to measure inflation.

Daily Market Update 5/23/08

Mortgage rates inched lower as the National Association of Realtors reported a 1% decline in Existing Home Sales for April from March. The annual pace of 4.89 million units represents a 17.5% drop from April 2007. The median price for the month fell 8% from a year ago. Stocks were lower as oil resumed its surge to nearly $133 a barrel. The main news for the week was Tuesday's release of minutes from the Fed's April FOMC Meeting indicating growing inflationary concerns among Fed members. Further rate cuts now appear unlikely, and most analysts expect the Fed to begin raising rates by year end. One positive development for the week was the return of investor confidence in financial markets, where the worst appears to be over.

Daily Market Update 5/22/08

Rates moved higher Thursday as crude oil prices topped $135 per barrel before falling back slightly. Bond traders now see a 30% chance the Fed will need to begin raising interest rates in September to help curb inflation according to the Chicago Board of Trade. US home prices fell 0.2% last quarter, less than forecast. Fed officials lowered their 2008 economic growth outlook yesterday, while raising their outlook for price growth. Separately, first time jobless claims fell to 365,000, down from 374,000 the prior week.

Daily Market Update 5/21/08

Mortgage rates were mixed Wednesday as fixed rates moved modestly higher and adjustable rates improved. Inflationary concerns, driven by higher oil prices and a weaker US Dollar, continue to dominate investor sentiment. Minutes from the April 30 Federal Open Market Committee meeting will be released this afternoon at 2:00 PM. This should provide a more detailed look at the reasoning behind the Fed's most recent rate cut. Economists will also be searching the report for hints as to the likely direction of future Fed moves.

Daily Market Update 5/20/08

Rates inched lower Tuesday morning as stocks tumbled. The Dow Jones Industrial Average is currently down nearly 200 points on the day. April's Producer Price Index rose a less than expected 0.2%, but this was largely offset by a greater than expected 0.4% increase in the "Core" PPI. The Core PPI excludes volatile food and energy prices. Meanwhile, crude oil prices topped $128 per barrel, setting another new record.

Daily Market Update 5/19/08

Rates were little changed Monday as leading indicators for April rose 0.1% as expected. The biggest economic report of the week will be tomorrow's Producer Price Index (PPI) data for April. The Existing Home Sales report is due out Friday, a day when the mortgage market will close at noon due to the Memorial Day Holiday. Expect rates to move slightly higher Friday as traders square positions ahead of the three-day weekend.

Daily Market Update 5/16/08

Mortgage rates eased following Friday's report on Consumer Confidence, indicating the lowest level since 1980. April Housing Starts rose unexpectedly by 8%. Building Permits, a leading indicator of housing market activity, rose 5%, the first increase in five months. Oil prices reached a new record high of $127 per barrel. Freddie Mac reported average mortgage rates fell to 6.01% for the week from 6.05% the previous week. Focus now turns to next Tuesday's release of the Producer Price Index for April as investors look for further signs of inflation.

Daily Market Update 5/15/08

Mortgage rates were little changed Thursday as Weekly Jobless Claims came in close to expectations and Industrial Production for April declined 0.7%. Crude oil prices continued climbing into record territory. Weakness in the economy would normally result in lower interest rates, but inflationary concerns are preventing any significant downward movement. Many economists are now predicting rate increases by the Fed before year end.

Daily Market Update 5/14/08

Rates were little changed Wednesday, regaining ground given up late Tuesday. The April "Core" CPI rose at a 2.3% annual rate, slightly lower than expectations, indicating higher food and energy prices have not been passed through to the prices of other goods thus far. The Fed generally aims to keep Core CPI readings below 2.5%. Average 30-year fixed rates fell to 5.82% (with points) from 5.91% the prior week.

Daily Market Update 5/13/08

Rates moved higher Tuesday as Retail Sales for April were generally stronger than expected, although auto sales fell short of forecasts. Investors remain concerned about the underlying rate of inflation caused by a variety of factors, particularly rising oil prices and the weak US Dollar. Tomorrow's release of the Consumer Price Index for April is being closely watched by economists and has the potential to be a significant market mover.

Daily Market Update 5/12/08

Mortgage rates were unchanged to slightly higher Monday morning with no major economic reports due out today. The remainder of the week will be active beginning with tomorrow's scheduled release of Retail Sales data for April, followed by the Consumer Price Index (CPI) on Wednesday.

Daily Market Update 5/9/08

Mortgage rates inched lower Friday as stocks tumbled on news of soaring oil prices, which hit a new record high of $126 per barrel. Oil prices have nearly doubled since last summer. The impact of higher oil prices on mortgage markets is yet to be determined. Inflationary pressures have been mounting as a result of higher energy costs in recent months. Higher inflation typically pushes interest rates higher, but the spike in prices at the pump is also likely to slow economic activity, which serves to hold inflation in check, creating a counter-balance. Major economic data to be released next week include Tuesday's Retail Sales report and Wednesday's Consumer Price Index, both seen as potential market movers. Industrial Production will come out Thursday, with Housing Starts and Consumer Sentiment rounding out the week on Friday.

Daily Market Update 5/8/08

Rates moved lower Thursday reflecting market improvement late Wednesday. Weekly jobless claims came in at 365,000, beating expectations. The Bank of England and the European Central Bank both held rates steady as expected, noting renewed inflationary pressures. No other economic data will be released today.

Daily Market Update 5/7/08

Rates were little changed this morning as first quarter Productivity rose a better than expected 2.2%. The National Association of Realtors reported a 1% decline in pending home sales for March from February, but a 20.1% decline from the same period last year. Oil prices continued rising above $122 a barrel and the Dollar strengthened. No other major economic reports are due out this week.

Daily Market Update 5/6/08

Mortgage rates were unchanged to slightly lower Tuesday as stock prices dropped in the wake of Fannie Mae's reported first quarter loss of $2.2 Billion and record high oil prices. Fannie announced plans to cut dividends and raise $6 Billion in new capital; their stock plunged 6% on the news. Meanwhile, Fed Chairman Ben Bernanke urged Congress to take action to reduce foreclosures in an effort to stabilize the real estate market.

Daily Market Update 5/5/08

Mortgage rates were little changed Monday following the ISM Services Index report showing surprising growth for April in the services sector of the economy. Modest upward pressure on rates resulted from a weaker Dollar and a rise in crude oil prices as Nigerian rebels attacked oil wells and pipelines over the weekend. The remainder of this week's economic calendar will be light with the exception of Wednesday's release of the April Productivity Report and Pending Home Sales Index.

Daily Market Update 5/2/08

Mortgage rates inched higher Friday as employment numbers beat expectations. The Report showed a net loss of 20,000 jobs in April, far better than the forecast loss of 75,000. The unemployment rate dipped to 5.0%. Rates improved slightly for the week following the Fed's 1/4% rate cut and their statement indicating concerns over rising inflation. Analysts are expecting the Fed to hold rates steady for the time being until they are able to fully assess the impact of previous cuts and the economic stimulus package checks currently being distributed.

Daily Market Update 5/1/08

Interest rates moved lower Thursday as investors continued analyzing yesterday's statement by the Fed. Most economists interpret the remarks to indicate a recognition of increasing inflationary pressures and a renewed emphasis on price stability. In other news, weekly jobless claims jumped to 380,000, well above forecast, and oil prices continued falling. Focus now turns to tomorrow's Employment Report for April. Weak data could provide room for further improvement in mortgage rates. The market will likely remain volatile until after the release, scheduled for 8:30 AM.