MetroDenverRealty.com

This weeks economic news:

Monday:

• No important economic data scheduled for release

Tuesday

• The Conference Board reported February’s Consumer Confidence Index (CCI) of 46.0 which was well below forecasts of a 55.0 reading. This means that consumers were far less optimistic about their own financial situations than many had thought. This is very good news for the bond market and mortgage rates because waning levels of confidence usually translates into lower levels of consumer spending.

Wednesday

• January’s New Home Sales report a 11.2% drop in sales of newly constructed homes. That indicates that the housing sector is not as stable as some wanted to believe and can be good news for the bond market. However, this data covered only approximately 15% of all home sales in the U.S. Friday’s Existing Home Sales report tracks the other 85% of sales.
• Chairman Bernanke is in the process of delivering the Fed’s semi-annual testimony on the status of the economy to the House Financial Services Committee. During his prepared statement he indicated concern about the employment sector and the unemployment rate that is expected to remain high for quite some time. He also said that he expects inflation to remain under control. Both were good news for the bond market and helped move bonds into positive ground.

Thursday

• January’s Durable Goods Orders report showed a surprising 3.0% increase in new orders for big-ticket items. This was much larger than the 1.4% increase that was expected, however, an upward revision of 0.9% to December’s orders made the month-to-month change less drastic. Also, a reading within the report that tracks new orders for products not attributed to transportation related items actually fell 0.6% when it was expected to rise. This means that overall new orders rose more than expected, but when more volatile transportation related orders are excluded, new orders fell short of forecasts. We can consider these results neutral or slightly favorable to bonds.
• The Labor Department gave us last week’s unemployment figures, announcing that 496,000 new claims for benefits were filed last week. This was much higher than expected and just a bit shy of the important benchmark of 500,000. It also means that new claims rose 12% over the past two weeks, raising concerns that the employment crisis may be worsening before it gets much better. This data usually has little impact on the markets, but the back-to-back spikes have influenced bonds and mortgage rates favorably this morning.
• Also worth noting are the second day of testimony from Fed Chairman Bernanke and the 7-year Treasury Note auction. Mr. Bernanke is expected to repeat yesterday’s speech to the Senate Banking committee today, so it will likely have little influence on trading and mortgage rates unless the Q & A portion of the proceeding reveals any surprises. Yesterday’s 5-year Note auction did not go very well, so there is little expectation that today’s 7-year sale will go much better.

Friday

• The 4^th quarter GDP revision came in a little higher or stronger than last month’s previous estimate of 5.7%. Today’s release showed a 5.9% rate of growth, meaning economic activity was stronger than many had thought. This headline number is bad news for bonds and mortgage rates because a strengthening economy raises inflation concerns and make bonds less appealing to investors.
• The University of Michigan updated their Index of Consumer Sentiment for February announced a reading of 73.6 that was close to forecasts. It is a slight decline from the previous estimate.
• January’s Existing Home Sales data from the National Association of Realtors reported a 7.2% decline in home resales last month when a small increase was expected. This dropped sales to their lowest level since last summer, indicating that the housing sector still has some hurdles to tackle. This can be considered favorable news for bonds, but the data usually does not heavily influence trading or mortgage rates.

©Mortgage Commentary 2010 Please E-mail us your opinion of this report