MARKET COMMENT

The most important data releases last week, the producer price and consumer price indexes, turned out to be nonevents. The producer price index showed that prices paid to U.S. producers unexpectedly fell by 0.2% in June after rising 0.9% in May. This good news was counterbalanced by a 0.3% rise in the core PPI, which excludes more volatile food and energy prices.

On the consumer end, the consumer price index rose 0.2% in June, down from May's 0.7% rise. The core CPI, which also excludes food and energy prices, advanced 0.2%, up from the previous month's 0.1% increase. The numbers were broadly in line with most expectations.

Meanwhile, housing continues on what seems like its unending Bataan Death March. Home construction unexpectedly rose in June, after two straight months of declines, but a plunge in building permits suggests the upturn will be short-lived. Additional signs of weakness were reflected in the N AHB/Wells Fargo Housing Market Index, which fell four points to 24. Any reading below 50 is considered pessimistic.

Mortgage rates held firm for most of the week, with the 30-year fixed-rate mortgage averaging 6.73%; the 15-year, fixed-rate mortgage averaging 6.38%, the five-year Treasury-indexed hybrid adjustable-rate mortgage averaging 6.35%; and the one-year Treasury-indexed adjustable-rate mortgage averaging 5.72%, according to Freddie Mac's weekly survey. Points averaged 0.4 to 0.6. Rates are about where they were this time last year.

MBA Mortgage Applications

Wed. July 25,
7:00 am, et

None

Existing Home
Sales
(June)

Wed. July 25,
10:00 am, et

5.83 Million (Annual Rate)

Beige Book

Wed. July 25,
2:00 pm, et

None

Important. The Federal Reserve is expected to expound its stance on housing and inflation.

Durable Goods
Orders
(June)

Thurs. July 26,
8:30 am, et

1.8%
(Increase)

New Home Sales
(June)

Thurs. July 26,
10:00 am, et

890,000
(Annual rate)

Important. Current estimates suggest little chance for an immediate recovery in new-home sales.

Gross Domestic Product
(2nd Quarter 2007)

Fri. July 27,
8:30 am, et

3.1% (Annualized)

Consumer Sentiment
(July)

Fri. July 27,
10:00 am, et

91
Index

MORE OF THE SAME

Anyone associated with the housing sector - builders, mortgage brokers, Realtors - would love to see improved sales in both new and existing homes this week. Unfortunately, that's unlikely to happen, so attention should be deflected to the secondary data releases; namely, the beige book and gross domestic product. Both will have direct bearing on interest rates.

Credit markets are resigned to the fact the Federal Reserve is unlikely to lower its influential fed funds rate this year, but they want additional insight on the Fed's stance on inflation and future economic growth. The beige book will supply that, while the gross domestic product will supply hard data on actual growth.

Given current expectations surrounding both data releases, which foresees no surprises, odds favor mortgage rates again holding steady for the week.