Interest rates took a big dip down over the past 2 weeks, last week Fannies gained almost a full point which has us below 5% again for well qualified buyers. Most of the move we have seen is due to the flight to quality because of Libya and Egypt. World Turmoil always pumps extra cash into our credit markets which drives the price up and the Yield down. Great if you are borrowing money, but typically bad for stocks.
The big issue with this improvement in rates: It is temporary. Once the dust settles money will begin to flow quickly out of credit and into equities or back out overseas where much of it came from. This will happen quickly and probably without any warning.
This is a new week, a new month and an entirely new set of economic reports for the market to chew on. Here is this weeks calendar:
- Monday February 28: January Personal income expected +0.3% Spending +0.4% and consumption +0.2%. The real numbers came in almost exactly as anticipated and the market was very flat at the end of the day only gaining 1/32nds at the closing bell.
- TuesdayMarch 1: February Institute of supply Management Manufacturing index expected 61.0%. The real number came in slightly higher at 61.4 and for the better part of the day we had Fannies losing quite a bit, this afternoon the market flattened out and turn slightly positive, so rates will likely hold steady and may even drop a bit tomorrow.
- Tuesday: Fed Chair Bernake presents to the Senate Banking Committee. The guess here is that his comments here would be "market friendly". That turns out to be accurate as we approach the closing bell today we have Fannies trading slightly up, as I type +3/32nds... So good news for interest rates... but only slightly good.
- WednesdayMarch 2: Bernakeis at it again this time with the House Financial Services Committee. This is more of a "do-over" from Tuesday and is likely to be a non event for Wednesday.
- Wednesday: It's Beige Book Time. The Beige book is a compilation of all 12 Federal Reserve districts put in one neatly bound "beige book". Most of this data is "known" from previous reports and it is not likely there will be any market shockers here.
- ThursdayMarch 3rd: Initial jobless claims expected to be up 9,000. Since this report takes in the Presidents Day Holiday it is not likely to be a market mover. For years we have seen this number pop up when we have 3 day weekends, so it isn'tlikely a trend to be concerned about.
- Thursday: February Institute of Supply Management Service Sector, expected 59.5%. The anticipation is of only a small improvement over last month.... a bit of a plateau.... This one is not a likely market mover for the day.
- Friday, March 4th: February Employment report with Non-Farm Payrolls expected up 178,000 a 9.1% jobless rate and Average hourly earnings +0.2%. This report is a bit of a mix of good and bad, but it will take some digging for the markets to digest it all. For the first half of the day I expect a lot of bouncy trading until the dust settles... The non farm number looks good, but the January report was beat up by the bad winter, much of the gains here are likely to be see as a correction for January's lack of growth. Here are a few Scary Statistics: If this is accurate, it will be the 22nd monthin a row with a jobless rate above 9, The longest stretch since 1948 when records first started being kept, But there is a positive spin: We have seen a 0.8% improvement in the past 2 months, The biggest improvement in such a short period of time since 1958. So as you can see, a lot to chew on that will likely end up being a neutral report for the market if there are no surprises.
- Friday: January Factory orders expected +0.2%. Not only is this a bit of old news, but in the wake of the jobless report this morning it is likely to be ignored.
This week has a lot to chew on, but by far we have 2 biggies to keep an eye on. The biggest is not a calendar item, it is the Middle East news. As long as we continue to see a flight to quality we will have steady to possibly lower rates, As oil prices climb we are also likely to see consumer spending pull back as it costs more to fill our tanks, all a recipe for lower rates. Friday's Employment report is likely to end up being a non event, but if there is a surprise here we may see huge swings in the market. These surprises do not happen often, but the biggest swings I have seen from a report over the past 24 years have mostly come from employment data and world "fun"... and we have both to look forward to this week.
The fact is that we saw a big swing down already, with most of the down not having any economic teeth holding rates down. So don't wait, jump on today's historically low rates!
PS: sorry for the delay in my report... Monday was a Monday of epic proportions!
Have a great week!
Rob
Mortgage Banker
NMLS ID# 248937
www.RobertRaufHomeLoans.com or my blog: http://activerain.com/blogs/rrauf
(732)223-1630 x102
Since 1987 I have been helping my clients fulfill their dream of home ownership!
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