Mortgage Secrets…Learn What the Experts Say

For the moment, prices are slightly improved even in the face of a hotter than expected read on consumer inflation. The overall Consumer Price Index (CPI) for July was reported at a fat 0.8%, far outweighing estimates of 0.4%. This left year over year Consumer prices up 5.6%, the biggest year-over-year increase since January 1991. After excluding volatile food and energy prices - the Core CPI rose 0.3%, also hotter than expectations of 0.2% leaving the year over year Core CPI at 2.5%, the biggest gain since January. The culprit is clearly higher Oil prices during July, which spiked to $147 a barrel. But the decline in Oil prices since maybe the reason why the Bond market is discounting a very unfriendly CPI Report.

Stocks are trading lower after poor earnings reports from farm equipment maker Deere & Co. and also by retailer Macy’s. This has helped Bonds hold onto their gains from yesterday.

Mortgage Bonds are trading a bit higher after a tough outing yesterday, which saw prices reverse lower from the tough ceiling of resistance at the 25-day Moving Average.

Mortgage Bonds are trading slightly higher, but are lower than the best levels of the morning, in response to a mixed bag of news and headlines.

Today’s very weak Initial Claims report showed 455,000 new claims, far worse than expectations of 420,000. This left the more closely watched four-week moving average to 419,500, the highest since July 2003. This report tells us pain still exists in the labor market.

Retail giant, Wal-Mart, announced that sales were less than expected and sales growth would slow in August. This news has pressured Stocks lower so far today and as a result helped support Mortgage Bonds earlier this morning.

With no economic reports due out today, Bonds may take their cue from Stocks, which enjoyed a sharp rally higher yesterday - the Dow Jones Industrial Average surged 331.62, for its biggest one day gain since April 1st. It is interesting to note that spikes higher like yesterday are historically more indicative of Bear markets than they are Bull markets.

It’s Fed Day once again, and at 2:15 PM ET, the Fed will release their Rate Decision and Policy Statement. We don’t expect the Fed to make any moves with rates, but the financial markets around the globe will be analyzing every syllable of their statement for clues as to when and if the Fed will start hiking rates to fight inflation.

A better than expected Jobs Report showed that 51,000 Jobs were lost in July, while the consensus was for 75,000 jobs lost. This report marks the seventh consecutive month of job losses. As we also suspected, the Unemployment Rate rose to a four year high of 5.7%, up from last month’s reading of 5.5%. Hourly Earnings rose 0.3%, or 6 cents to $18.06 per hour, matching economists forecasts. As expected, Bonds had a knee jerk reaction to the downside as the report was better than expected, but the increase in the Unemployment Rate has prevented the sell-off from accelerating so far.

Mortgage Bonds are trading higher in response to some weaker than expected economic data.

The Jobs Report is due tomorrow morning and the way things have been going, it doesn’t look so great.

Stay tuned…

The ADP Employment Report for July was released this morning, and the findings came in at a surprising gain of 9,000 jobs created in July when the estimates called for a loss of 60,000. After factoring an average of 20,000 new government jobs typically added, the ADP report suggests Friday’s official release may come in somewhere around 30,000 new jobs created - and at the moment, economists are expecting Friday’s official Jobs Report to show a loss of 70,000 jobs. On the news, Mortgage Bonds, which had already opened lower, added to their losses.

This morning, higher than expected earnings from Amgen, lower oil prices and a boost in Consumer Confidence has helped Stocks move higher - but it is at the expense of Bonds, which are presently trading near their lowest levels of the day.