Daily Market Update 10/31/08

Mortgage rates improved Friday following an abundance of negative economic data. Consumer Spending fell 0.3% in September, the largest monthly decline in 4 years. Consumer Sentiment registered the largest drop in 30 years, and the Chicago Purchasing Managers Index fell to 37.8 in September from 56.7 in August, the largest monthly decline in the 40-year history of the index. Surprisingly, stocks were little changed and the dollar moved higher against the euro. A growing chorus of analysts are calling on the Federal Government to officially take over Fannie Mae and Freddie Mac. An explicit guarantee of their securities would likely push mortgage rates significantly lower, more in line with Treasuries. Stubbornly high mortgage rates have contributed to the current housing crisis by preventing bargain-hunting homebuyers from entering the market. Fixed rates of 5% or less would provide a much-needed stimulus for the housing industry. No decision is expected until after next week's election.

Daily Market Update 10/30/08

Mortgage rates moved slightly higher Thursday following this morning's release of preliminary third quarter GDP figures. According to the data, the economy contracted 0.3% in the three months ending September 30. Although this was the first negative reading since 2002, traders had anticipated an even larger contraction. Stocks initially moved higher on the announcement. Later, gains were pared as analysts focused on a troubling component of the report, a 3.1% annual drop in consumer spending, the first decline since 1991. A significant reduction in spending could result in a far deeper and more sustained economic downturn. On a more positive note, the recent freeze in credit markets showed signs of easing, as the market for commercial paper expanded for the first time in seven weeks.

Daily Market Update 10/29/08

Mortgage rates were little changed Wednesday ahead of today's Federal Open Market Committee decision regarding short term interest rates. The Fed is widely expected to cut the Fed Funds rate from 1.50% to 1.00%. Their announcement will be made at 2:15 PM et. Mortgage rates have risen in the past week as many investment funds have been forced to sell mortgage-backed securities to reduce their leverage and raise capital. Under normal market conditions, the vast majority of significant rate movements are the result of economic news. The fundamental economic data clearly supports lower rates, but until the market stabilizes, unusual volatility and upward pressure on mortgage rates will continue.

Daily Market Update 10/28/08

Rates inched higher Tuesday as mortgage-backed securities markets remained extremely volatile. Mortgage rates have increased by about 3/4% since last Wednesday, driven by the continued liquidation of investments by hedge funds and financial institutions. In economic news, Consumer Confidence fell to its lowest reading on record in October, far below consensus. Rate volatility is likely to continue throughout the week with key economic data being released each day starting Wednesday plus tomorrow's meeting of the Federal Open Market Committee of the Federal Reserve.

Daily Market Update 10/27/08

Rates were little changed Monday as traders looked ahead to a flurry of economic news later this week. The Federal Open Market Committee (FOMC) of the Federal Reserve meets Wednesday to determine short term interest rate policy. Many analysts are expecting a 1/2% cut in the Fed Funds rate. Durable Goods Orders will also be released Wednesday. Advanced third quarter GDP will be released Thursday and is expected to show a 0.1% decline in economic growth for the period. Rounding out the week will be Friday's release of the Chicago Purchasing Managers Index. In other economic news, New Home Sales rose 2.7% last month, propelled by lower home prices. Stocks were modestly lower.

Daily Market Update 10/24/08

Mortgage-backed securities moved in opposite directions with Treasuries again Friday as nervous investors sought to minimize risk. Mortgage rates inched higher while Treasury rates dropped. Global stock markets plummeted on growing economic fears. Existing Home Sales rose unexpectedly last month by 5.5% as lower prices attracted more buyers. Oil prices fell to $64 per barrel in spite of an announced 5% production cutback by OPEC. The dollar moved higher.

Daily Market Update 10/23/08

Mortgage rates inched higher Thursday after falling steadily over the past week. Weekly Jobless Claims came in at 478K, slightly higher than expected. FDIC chief Sheila Bair announced guarantees to encourage loan modifications by servicers in an effort to prevent "avoidable" foreclosures. Stocks moved higher. The Federal Reserve Open Market Committee (FOMC) meets next Wednesday and is expected to lower the Fed Funds Rate by 1/4%.

Daily Market Update 10/22/08

Treasury markets were higher, stocks lower, and mortgage-backed securities flat as investors consider them riskier than Treasuries and safer than stocks. Global stock markets fell today on growing concerns of worsening economic conditions here and abroad. Oil prices fell to about $68 per barrel on weaker demand. The dollar moved higher against most foreign currencies. No economic data is scheduled for release today.

Daily Market Update 10/21/08

Mortgage rates improved Tuesday as global financial markets showed signs of renewed confidence. The so-called TED spread, the difference between what banks and the US Treasury pay to borrow for three months, fell to 261 basis points today after peaking at 464 basis points October 10, indicating a significant thawing of credit markets. Stocks inched lower, the dollar higher. Oil prices fell to about $72 per barrel, down from $147 in July. No economic data will be released today.

Daily Market Update 10/20/08

Mortgage rates improved slightly Monday as the yield spread between mortgage-backed securities and Treasuries declined. The Index of Leading Indicators rose last month, but the reading appears to be an anomaly caused by the steepening yield curve and increased money supply, both resulting from the credit crisis. Fed Chairman Bernanke, in testimony before the House Budget Committee, endorsed consideration of an additional economic stimulus package. Stocks moved higher. No additional economic data will be released today.

Daily Market Update 10/17/08

Rates inched lower Friday following a spate of gloomy economic reports. September Housing Starts fell to 817K, far below consensus, reaching their lowest levels since 1991. Building Permits, a leading indicator, fell to 786K. Consumer Sentiment fell to its lowest reading in the 30 year history of the index. Mortgage rates peaked on Wednesday after having risen by about 1% over the previous 10 days, and have since fallen about .5%. The drop provides an opportunity for anyone floating the rate on a pending loan to lock in. Stocks are now modestly higher after having fallen sharply at the open.

Daily Market Update 10/16/08

Mortgage rates improved Thursday as mortgage-backed securities rallied late yesterday on the 733 point decline in the Dow. The September Consumer Price Index (CPI) and "core" CPI both came in lower than expected, indicating tame inflation. Industrial Production fell 2.8%, well below consensus, showing the largest monthly decline since 1974. Stocks were modestly lower. Oil prices dipped to $73 per barrel, a 50% decline since peaking in July. The dollar continued its upward trend against the euro.

Daily Market Update 10/15/08

Mortgage rates rose Wednesday in spite of weaker than expected Retail Sales for September and falling stock prices. Retail Sales fell 1.2%, the largest monthly decline in three years. The September Producer Price Index (PPI) fell 0.4% from August but was up 8.7% from one year ago. The more closely watched "core" PPI, which excludes food and energy components, rose 0.4%, higher than projected. Recently, mortgage-backed securities markets have broken the usual pattern of moving in the opposite direction of the stock market. Fed Chief Ben Bernanke is scheduled to speak at 12:15 et.

Daily Market Update 10/14/08

Mortgage rates were little changed Tuesday, although Treasury rates jumped on news of the latest government plan to purchase non-voting shares of several key US banks. Stocks were mixed. No economic data will be released today. Markets remain volatile as traders continue to assess the likely impact of the various government rescue measures.

Daily Market Update 10/13/08

Rates are unchanged from Friday as bond markets are closed today in observance of Columbus Day. Stocks rallied in markets around the world Monday causing investors to speculate that the worst of the carnage may be over. Several key economic reports for September are due out later this week, starting with Wednesday's release of Retail Sales and the Producer Price Index, followed by Thursday's Industrial Production and the Consumer Price Index. So much has happened in recent weeks, however, that normal trader responses to the data may be muted.

Daily Market Update 10/10/08

Mortgage rates surged Friday morning, partially reflecting market activity late Thursday. Conventional 30-year fixed rates have jumped about 3/4% in the past 48 hours. The two main culprits have been concerns that the supply of debt will increase significantly to pay for all the government rescue actions and deleveraging. Due to margin calls and investor redemptions, many investment funds have been forced to sell assets to reduce their leverage. The global sell-off in stocks continued today. The Dow opened down about 700 points but has since recovered to about minus 250. Oil prices plunged to $81 per barrel, a 45% drop since July. Several key economic reports are due out next week, although the market turmoil has recently been trumping all other data.

Daily Market Update 10/9/08

Mortgage rates moved higher Thursday as global stock markets recovered some of their recent losses. The flight to quality trade has been reversing, meaning that investors are leaving the relatively safe haven of bond markets. In addition, the added supply of debt needed to fund the rescue plan is weighing on bonds and mortgage-backed securities. Jobless Claims came in close to expectations. No more economic data will be released today.

Daily Market Update 10/8/08

Rates moved higher Wednesday in what has been an extremely volatile day for financial markets. The Federal Reserve, in a coordinated move with other central banks around the world, cut the Fed Funds Rate from 2.00% to 1.50%. Investors' uncertainty about the economy may result in greater volatility than usual in the coming weeks.

Daily Market Update 10/7/08

Mortgage rates were little changed Tuesday ahead of Fed Chairman Ben Bernanke's speech at the National Association of Business Economics annual meeting. His comments are expected to focus on the current global financial crisis and will be closely watched by investors. The Fed announced a plan to purchase US Commercial Paper in an effort to ease liquidity for businesses. The minutes from the September 16 meeting of the Federal Open Market Committee (FOMC) will be released at 2:00 PM, although much has changed in recent weeks, so the information may be of little value. The dollar moved lower on expectations of an imminent rate cut by the Fed. Stocks were mixed.

Daily Market Update 10/6/08

Interest rates benefited Monday from another sharp sell off in stocks. The Dow Jones Industrial Average dropped below 10,000 for the first time in over four years. The euro fell sharply against the dollar on growing concerns over the financial stability of European banks. Oil plummeted to $90 pb, down 39% from its peak in July. Credit markets remain tight in spite of last week's passage of the $700 billion rescue package. No economic data will be released today.

Daily Market Update 10/3/08

Mortgage rates were little changed Friday as the House began debating the $700 billion rescue package. Stocks rose modestly on hopes an agreement would be reached later today. Non-Farm Payrolls fell by 159,000 in September, much larger than expected. The Unemployment Rate held steady at 6.1%. Traders' main focus remains on the fate of the government rescue plan. Markets are likely to remain extremely volatile while negotiations on the rescue package continue.

Daily Market Update 10/2/08

Rates inched lower Thursday as stocks fell sharply on weak economic data. Jobless Claims rose to 497,000, the highest level since September 2001, while Factory Orders declined 4.0% last month, worse than expected. Last night the Senate overwhelmingly approved the $700 billion rescue package, although its fate remains uncertain in the House. Tomorrow will likely be an extremely volatile day for the markets, as the closely-watched Employment Report will be released at 8:30 AM and the House takes up the Senate version of the government rescue plan. In other news, the European Central Bank (ECB) held rates steady, while the Federal Reserve is said to be considering further rate cuts to help stimulate the US economy.

Daily Market Update 10/1/08

Rates eased Wednesday morning after surging late Tuesday, as the pattern of market volatility continues. Stocks fell sharply on lower corporate earnings estimates and ISM Index data indicating the manufacturing sector of the economy contracted more than expected in September. Traders have increased their bets on the likelihood of a looming recession in recent days. The Senate is scheduled to vote later today on a revised government rescue package that includes tax relief and a temporary increase in FDIC coverage on bank deposits. The measure is expected to pass the Senate and move back to the House for reconsideration.