I don't even want to talk about last week, but I guess I need to.Friday was a horrific day in the credit markets and fannies lost 29/32nds by the close of business. That was a total loss of 26/32nds for the week. that may not sound like much, but that is an ugly number! WHY? Well it had a lot to do with comments that came from the Fed Chair. Bernake said that the Fed is ready to raise short term rates when they see sustainable growth. Here is the fun part: This is nothing new, this is what he has said over and over this year.. Basically "if we need to we will". This time the market seems to have taken the words and read between the lines and now think we will see the Fed begin to raise rates in the first quarter of 2010. prior to Friday they seem to have thought things would stay the same until the 3rd quarter of 2010. If you have been reading any of my blogs you may remember me saying I thought we wouldn't see any sustainable growth until the end of the first quarter at that time we will probably see the Fed begin to move.
Well, if you were wondering why the world blew up on Friday, that is why. the good news is we gained back 11/32nds when the market opened and we have pretty much stayed there most of the day.
Here is what we have in store for this week:
- Monday: the market was closed, that's why I am a day late on this!
- Tuesday October 13, 2009: No significant news today, but a happy credit market and some improvement in rates
- Wednesday: I will be speaking at the OCBR's fall round table in Toms River.
- Wednesday October 14: September Retail sales expected -2.1% ex auto +0.2%. This is a pretty weak number, but it was the end of the cash for clunker program and is likely to be dismissed because of that.
- Wednesday: August Business inventories expected -0.9%. August numbers are old and not likely to be market movers. But eventually the decrease in inventories will lead to increased production to re-stock the shelves, so the inventory number doesn't matter that much now, but it may effect a production number down the road.
- Wednesday: September Fed Meeting Minutes released. Expect this report to be read, and re-read looking for clues. It is not likely that there will be anything new, but a hint at sustainable growth will be bad for rates (good news is bad news in the credit markets folks)
- Thursday, October 15: September CPI expected +0.2% with a core of +0.1%. If the core stays below +0.2% it should be a non event. If we get surprised with a big increase in the core CPI we will see a sell off in the credit markets leading to higher rates.
- Friday, October 16: September Industrial Production expected +0.2% and Capacity Utilization 69.7. This bump up is mostly inventory rebuilding, as forecast it is not a sign of a boom, so not a likely market mover.
Well, that's what we have in store for the week. The biggie is most likely the CPI number on Thursday. If this is as forecast it is likely to be a quiet week for rates and we may actually see a little improvement in the market after the big sell off last week. We do appear to be a bit over sold and it is not unusual to get a bit of a bounce back. I just doubt the bounce back will be to levels as "nice" as we had unless we are surprised by an exceptionally weak number or Fed comments that counteract the Friday Leak.
By the end of the week I bet we look pretty much unchanged, but wouldn't be surprised by a slight improvement.
I hope this is a useful tool for you
Have a great week!
Rob
Mortgage Banker
www.RobertRaufHomeLoans.com or my blog: http://activerain.com/blogs/rrauf
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