This week looks to be another exceptionally volatile week. When I wrote last weeks outlook, the focus was on oil prices and the 10yr Treasury Auction. Well the market didn't disappoint with a strong auction that led to mortgage rates trending lower. This coming week has some economic data points, continued oil instability and the market after shocks of Friday's earthquake in Japan. In overnight trading the Japanese market has is down considerably and the question remains whether that will carry over to our market. No matter what the answer it's going to be a crazy week in the market for sure.
Economic Data Points on the Calendar This Week
Tuesday 10AM- The Housing Market Index- By definition the National Association of Home Builders produces a housing market index based on a survey in which respondents from this organization are asked to rate the general economy and housing market conditions. The housing market index is a weighted average of separate diffusion indexes: present sales of new homes, sale of new homes expected in the next six months, and traffic of prospective buyers in new homes. The question will be will recent fuel prices affect the market and the spending.
Tuesday 215PM- FOMC Meeting results- The overwhelming consensus is that the Fed will keep the rates un-changed but pay close attention to the language and to how many members vote in line with each other.
Wed.830AM- Housing Starts- They had a surprise jump last month and many think the trend will continue. Will new construction continue to show signs of hope or was the January report just a blip??
Wed & Thursday AM- PPI & CPI- This could be very interesting. Is inflation still far enough off in the horizon not to worry about now or is it time to pull in the reigns?
I think rates will head lower this week. The market proved last week that it's extremely volatile and investors are more willing to sell and take profits at this level than to allocate new money. I think there are too many factors working against the market at this point.
Middle East Instability and higher oil prices
A stock market that is looking for a reason to pull back
The predicted strong drop in the Japanese market after the earthquake
Rates may stay where they are but I look for there to be momentum pushing rates lower rather than higher.
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