Mortgage Time
#1
03-02-2007, 09:16 PM
Mortgage Time
Mortgage Rates Benefit from Weak Stock Market
Despite a schedule packed with major economic reports, the data took a backseat to a falling stock market in driving mortgage rates last week. US equity markets experienced a large selloff on Tuesday, leading investors to shift funds to the relative safety of fixed income investments, including mortgage securities. Mortgage rates benefited from this “flight to quality”, falling moderately that day. For the rest of the week, nearly every change in mortgage rates could be attributed to movements in the stock market, and rates ended a little lower than the prior week. A wide range of economic data came out during the week, some stronger than expected and some weaker, but it never diverted investors’ attention away from the stock market or influenced mortgage rates.
As usual, a combination of factors was responsible for the decline in the stock market, but the immediate source of the troubles began with larger losses in the Chinese stock market on Monday night. In testimony on Wednesday, Fed Chief Bernanke agreed that no "single trigger” caused the selloff, and he suggested that there was no material change in the Fed's expectations for the US economy, which helped to stabilize the markets.
In the housing sector, the news was mixed, but overall it was slightly positive. The important January Existing Home Sales report showed a larger than expected increase. Inventories remained roughly flat, and median prices were a little lower than one year ago. Unusually warm weather may have contributed to the unexpectedly high level of sales. The extremely volatile New Home Sales report showed a decrease of 17% in January, offsetting increases over the prior two months.
Also Notable:
[ul][*]Major US equity markets suffered their largest weekly losses in two years[*]The important Existing Home Sales report showed a larger than expected increase in January[*]Former Fed chief Greenspan surprised investors with his warning that a recession may be possible later in the year[*]Freddie Mac announced that it will stop purchasing certain risky subprime loans[/ul]
Average 30 yr fixed rate:Last week:+0.03%This week:-0.04%
Stocks (weekly): Dow:12,168-482NASDAQ:2,377-138
Week Ahead
The performance of the stock market will continue to be a major influence on mortgage markets next week. In terms of economic data, the always important monthly Employment report will be released on Friday of next week. As usual, this data on the number of new jobs created and the Unemployment Rate will be the most highly anticipated economic data of the month, since the health of the labor market is perhaps the single biggest factor in the performance of the economy. Early estimates are for about 100,000 new jobs in February. Next week’s other economic data will include ISM Services, Productivity, the Beige Book, and the Trade Balance. Finally, Thursday’s interest rate announcement from the European Central Bank may have an impact on US markets.
Despite a schedule packed with major economic reports, the data took a backseat to a falling stock market in driving mortgage rates last week. US equity markets experienced a large selloff on Tuesday, leading investors to shift funds to the relative safety of fixed income investments, including mortgage securities. Mortgage rates benefited from this “flight to quality”, falling moderately that day. For the rest of the week, nearly every change in mortgage rates could be attributed to movements in the stock market, and rates ended a little lower than the prior week. A wide range of economic data came out during the week, some stronger than expected and some weaker, but it never diverted investors’ attention away from the stock market or influenced mortgage rates.
As usual, a combination of factors was responsible for the decline in the stock market, but the immediate source of the troubles began with larger losses in the Chinese stock market on Monday night. In testimony on Wednesday, Fed Chief Bernanke agreed that no "single trigger” caused the selloff, and he suggested that there was no material change in the Fed's expectations for the US economy, which helped to stabilize the markets.
In the housing sector, the news was mixed, but overall it was slightly positive. The important January Existing Home Sales report showed a larger than expected increase. Inventories remained roughly flat, and median prices were a little lower than one year ago. Unusually warm weather may have contributed to the unexpectedly high level of sales. The extremely volatile New Home Sales report showed a decrease of 17% in January, offsetting increases over the prior two months.
Also Notable:
[ul][*]Major US equity markets suffered their largest weekly losses in two years[*]The important Existing Home Sales report showed a larger than expected increase in January[*]Former Fed chief Greenspan surprised investors with his warning that a recession may be possible later in the year[*]Freddie Mac announced that it will stop purchasing certain risky subprime loans[/ul]
Average 30 yr fixed rate:Last week:+0.03%This week:-0.04%
Stocks (weekly): Dow:12,168-482NASDAQ:2,377-138
Week Ahead
The performance of the stock market will continue to be a major influence on mortgage markets next week. In terms of economic data, the always important monthly Employment report will be released on Friday of next week. As usual, this data on the number of new jobs created and the Unemployment Rate will be the most highly anticipated economic data of the month, since the health of the labor market is perhaps the single biggest factor in the performance of the economy. Early estimates are for about 100,000 new jobs in February. Next week’s other economic data will include ISM Services, Productivity, the Beige Book, and the Trade Balance. Finally, Thursday’s interest rate announcement from the European Central Bank may have an impact on US markets.
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