US Stocks are off to a shaky start as they search for direction between the Bulls, and the Bears.  Mortgage Bonds have broken through overhead pricing resistance, and are trading above yesterday's high point.

Stocks have made a couple of u-turns already today; initially gaining ground, turning negative on weaker than expected housing reports, and now back positive, despite fears of possibly the worst earnings season in a quarter century.  Pending home sales came in lower than expected, but there was also a positive revision to the prior month's numbers.  As 2nd quarter earning's reports prepare for release, it is a "given" that Financials, Airlines, and Auto makers will have horrible results, and if this bleeds into other sectors we could see returns as much as 6 times worse than previously predicted.  On a positive note Oil prices have dropped by nearly $5 per barrel as the US Dollar shows further signs of strengthening. 

Mortgage Bonds are continuing yesterday's rally on the heels of this poor economic news.  Fed Chairman Ben Bernanke addressed the FDIC Mortgage Lending forum this morning, stating his case for extending the Term Auction Facility it established to help out investment banks, while laying out new rules to curtail predatory lending practices.  FNMA & FHLMC shares saw a brief rebound in early trading, but have since fallen back on continuing concerns over their potential need to raise $Billions in Capital, due to new accounting regulations.  Traders fear this may restrict their ability to provide access to mortgage credit, further squeezing the housing industry.  This coming on a day that saw one of the nation's top ten mortgage lenders, Indymac, barred from raising further new capital, and forced to stop originating new loans without getting a special waiver from the FDIC.

Price sheets were released after Bonds broke above resistance, so most should have improved pricing from yesterday.  As a result, I am cautiously floating for now, but with the volatility in today's Market, don't be afraid to lock in recent gains.

Make it a great day!

Ron Brown

First Mortgage Company of Washington

253-520-0000