This Week’s Market Commentary

This week brings us the release of only two relevant monthly economic reports but neither of them is considered to be highly important. There are two important Treasury auctions this week that may influence mortgage rates more than the minor economic data that is scheduled.

It is also a holiday-shortened week with the bond market closed Friday in observance of the Veterans Day holiday. The stock markets will be open Friday, but bonds will not be traded meaning that many lenders will be closed.

Neither of this week’s monthly economic reports is expected to lead to noticeable changes in mortgage rates. This means that the stock markets will likely be a significant influence on bond trading and mortgage rates in addition to the two particular Treasury auctions. If the stock markets rally, we could see funds shift from bonds into stocks that potentially offer better returns, leading to higher mortgage rates. If stocks fall from current levels early in the week, bonds and mortgage shoppers should benefit.

The two important Treasury auctions come Wednesday and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important of the two as it will give us a better indication of demand for mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would probably result in upward revisions to mortgage rates.

The first monthly data of the week is September’s Goods and Services Trade Balance report early Thursday morning. It helps us measure the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities’ proceeds are worth more when sold and converted to the investor’s domestic currency. However, its results will not likely directly lead to changes in mortgage rates. Analysts are expecting to see a $45.8 billion trade deficit.

November’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment will be released late Friday morning. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 61.5, up from October’s final reading of 60.9. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, any related data is watched closely.

Overall, it is difficult to predict just how active this week will be for mortgage rates. As expected, last week brought us quite a bit of volatility in rates. This week could be very calm or could be just as active as last week was. I don’t believe the economic data on tap will be a catalyst. I think the key will be the stock markets and Wednesday’s Treasury auction. If they give us favorable results, mortgage rates will likely close the week lower than today’s opening levels.

Consumer Sentiment Rises in October

With improved views on the economy, consumer sentiment rose in October to the highest reading since July, while remaining at relatively low levels, according to data released Friday by the University of Michigan and Thomson Reuters

The final sentiment reading for October reached 60.9, compared with a preliminary October reading of 57.5, and a September level of 59.4. Despite the modest improvement, consumers remain concerned about personal finances, and with “widespread distrust” of Washington, D.C., politicians their gloom is likely to remain, according to Richard Curtin, chief economist for the consumer survey.

“The upcoming debates about spending cuts and tax hikes surrounding the budget resolution will increase uncertainty and cause consumers to become even more prudent spenders,” Curtin said in a statement. “Although a renewed downturn in the economy has a 50-50 chance of starting around the start of 2012, it is even more likely that growth will not be robust enough to restore consumer optimism about their job and income prospects.”

Economists polled by MarketWatch had expected a slight increase in October to 58 with consumers somewhat cheered by stock gains.

The sentiment reading, which covers how consumers view their personal finances as well as business and buying conditions, averaged about 87 in the year before the start of the most recent recession.

Consumer spending makes up the largest portion of the economy, and economists watch confidence readings to get a feel for the direction of spending. Still, analysts have noted a recent breakdown in the relationship between sentiment and spending — consumers have been spending more than would be expected given recession-level sentiment. Further, given that the labor market has been steadily, though slowly, adding jobs since 2010, some have been expecting somewhat higher sentiment results.

This Week's Market Commentary

Monday’s bond market has opened in positive territory due to early stock weakness. The stock markets are in selling mode during morning trading due mostly to concerns about overseas financial issues. The Dow is currently down 209 points while the Nasdaq has lost 32 points. The bond market is currently up 23/32, which will likely improve this morning’s mortgage rates by approximately .250 - .375 of a discount point.

There is no relevant economic data scheduled for release today. As expected, the bond market is being influenced by stock movement. With the major stock indexes posting sizable losses, bonds are benefiting as investors seek safe-haven from the volatility. If stocks extend this morning’s losses, we could see further improvements to mortgage rates this afternoon.

The rest of the week brings us the release of only three monthly reports that are relevant to mortgage rates in addition to another FOMC meeting. The first is August's Housing Starts early tomorrow morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand by tracking construction starts of new homes, but is usually considered to be of low importance to the financial and mortgage markets. It is expected to show a decline in new home starts between July and August. I believe we need to see a significant surprise in this data for it to have a noticeable impact on mortgage rates tomorrow.

This week’s FOMC meeting begins tomorrow and is a two-day meeting. Mr. Bernanke and friends will adjourn at 2:15 PM ET Wednesday. There is no chance of seeing any type of change to key short-term interest rates. However, the post-meeting statement could very well lead to volatility during afternoon trading as investors dissect it in an effort to find when the Fed's next move may come. Market participants are anxiously waiting to hear what the Fed has in mind to help stimulate economic activity. Many feel that there isn’t much that they can do at this point to quickly boost economic growth. This was originally scheduled to be a single day meeting, but was extended to a two-day meeting to allow more time for them to discuss their options. Needless to say, it will be an interesting afternoon Wednesday when the post-meeting statement is read.

Overall, there really isn’t a specific report that stands out as the most important of the week. The most important day is Wednesday with the Existing Home Sales report and the FOMC meeting, but I don't believe any of this week's economic data has the potential to move the markets or mortgage rates heavily. However, we still may see some changes in rates day-to-day, especially if the stock markets show more volatility. If still floating an interest rate, continued contact with your mortgage professional is recommended, especially the middle part of the week.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now...

This Week's Market Commentary

This week brings us the release of five relevant economic reports that may influence mortgage rates in addition to two Treasury auctions. A couple of these reports are considered to be highly important to the financial and mortgage markets, meaning that we may see significant changes to rates this week. There is a very good chance of seeing noticeable changes in rates at least one day, if not several days. There is no relevant news scheduled to be posted tomorrow, so look for the stock markets to be the biggest force behind bond trading and changes to mortgage pricing until we get to the data releases.

The week’s first event is a 10-year Treasury Note auction Tuesday, which will be followed by a 30-year Bond auction Wednesday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating interest in longer-term securities such as mortgage-related bonds still exists, the earlier losses are usually recovered after the results are announced. The results of the sales will be posted at 1:00 PM ET each day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading Tuesday and Wednesday.

The important economic data starts Wednesday morning when August's Retail Sales report and Producer Price Index (PPI) will both be posted early morning. The sales report will give us a very important measurement of consumer spending, which is extremely relevant to the markets because it makes up two-thirds of the U.S. economy. Current forecasts are calling for a 0.2% increase in sales. Analysts are also calling for a 0.3% rise in sales if more volatile auto transactions are excluded. Larger than expected increases would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate economic growth.

One of the week's two important inflation readings is the second report scheduled for release Wednesday morning. The Labor Department will post August's Producer Price Index (PPI), giving us an important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting no change in the overall index, and a rise of 0.2% in the core data. Stronger than expected readings could fuel inflation concerns in the bond market. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond's future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leading to falling prices and higher mortgage rates.

Thursday also has two reports scheduled, but one is much more important than the other. The first is August's Consumer Price Index (CPI) during early morning hours. The CPI is one of the most important reports we see each month. It is considered to be a key indicator of inflation at the consumer level of the economy. As with its' sister PPI report, there are two readings in the report- the overall index and the core data reading. Current forecasts show a 0.2% increase in the overall reading and a 0.2% rise in the core data reading. As with the PPI, a larger increase in the core data would likely lead to higher mortgage rates Thursday.

August's Industrial Production data will be posted mid-morning Thursday. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be moderately important but could help change mortgage rates if there is a significant difference between forecasts and the actual reading. Analysts are expecting to see little change from July’s level of output. A sizable increase could lead to higher mortgage rates, while a weaker than expected figure would indicate a still softening manufacturing sector and would be considered good news for bonds and mortgage rates. However, the CPI is the key data of the day and will likely influence mortgage pricing much more than the production data will.

The last release of the week will be posted by the University of Michigan late Friday morning. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which hints at consumers' willingness to spend. If confidence is rising, consumers are more apt to make large purchases. But, if they are growing more concerned of their personal financial situations, they probably will delay making that large purchase. This influences future consumer spending data and can impact the financial markets. It is expected to show a reading of 56.3, which would mean confidence rose from August's level. That would be considered bad news for bonds and mortgage rates because strengthening consumer spending fuels economic growth.

Overall, I think we need to label Wednesday or Thursday as the most important day of the week with the Retail Sales and CPI reports being released respectively. However, Tuesday’s 10-year Treasury Note auction also has the potential to heavily influence bond trading and mortgage rates. Tomorrow will probably end up being the calmest day for mortgage rates, but we still may see minor changes if the stock markets show much movement.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now...

This Week’s Market Commentary

This week brings us the release of only two pieces of economic data, but neither of them is considered to be highly important. In addition to the economic releases, we also have two speaking engagements that may influence the markets and possibly mortgage pricing. The financial and mortgage markets will closed today in observance of the Labor Day holiday, meaning we will not see new mortgage rates until Tuesday morning.

 

The first release of the week comes Wednesday afternoon. The Federal Reserve will release its Beige Book report at 2:00 PM ET Wednesday. This report details current economic conditions in the U.S. by Federal Reserve regions. It is believed to be a key source of data when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed’s next move.

July’s Goods and Services Trade Balance data will be posted early Thursday morning, giving us the size of the U.S. trade deficit. It is expected to show a deficit of approximately $51.5 billion, which would be a decline from June’s $53.1 billion. However, I would consider this the least important of this week’s events, meaning it will likely have little impact on bond trading or mortgage rates unless it varies greatly from forecasts.

Thursday also has the two speeches that we need to watch. The first is at 1:00 PM ET when Fed Chairman Bernanke speaks to the Minnesota Economic Club in Minneapolis. Anytime Mr. Bernanke speaks, there is a potential for his words to cause havoc in the markets. However, I don’t believe he will say anything that we did not see or hear in last week’s FOMC minutes or his speech in Jackson Hole the previous week. Still, he is speaking, so we are listening.

The one that is more likely to have a noticeable impact on the markets and mortgage pricing comes from President Obama Thursday evening. He will speak to the nation via a joint session of Congress at 7:00 PM ET about the economy and the current employment situation. He is looking for support in his ideas to boost economic activity and payroll numbers. It will be interesting to see what ideas he has, but there is little doubt that if anything substantive is proposed, we will see an active morning in the markets Friday. Since he will be speaking after market hours Thursday, his words will influence the international markets before the U.S. markets. That should give us an idea of what to expect Friday morning.

I think many believe that the current situation in Washington makes it very difficult for all parties to quickly pass any type of bill that will really lower unemployment and help the economy gain momentum. Therefore, it is unlikely that Thursday’s speech will unveil a plan that will make everyone happy, but hopefully it will at least get the ball rolling. After the debt ceiling debacle, maybe Washington learned to play a little nicer with each other. We will see.

Overall, this week looks like it may be a little less active for mortgage rates than last week was. With the financial markets closed tomorrow, we only have four days of trading. There is no particular data that is important enough to label its day of release as the most important of the week, but Thursday’s speeches make that day the best candidate. The lack of important economic news may allow the stock markets to heavily influence bond trading and mortgage rates this week. As long as the stock markets do not stage a sizable rally or sell-off, the likelihood of seeing significant changes to mortgage rates before Thursday or Friday morning is fairly minimal.

3 Tips for Increasing Intelligence

Webster's Dictionary defines intelligence as the ability to learn and understand, or to deal with new or trying situations. Simply put, it's the degree of one's mental sharpness.

It's easy to believe that your intelligence is set, meaning there's no way to "boost" your brainpower. However, many scientific studies have proven the exact opposite. A combination of lifestyle adjustments and mental exercises has been shown to not only increase intelligence, but also to improve general brain health and help prevent disorders associated with aging, such as Alzheimer's disease.

According to most neurologists, the key is to stay mentally active, despite your age. The following five tips will help boost your mental activity and increase your intelligence.

Get Some Sleep - An adequate amount of restful sleep is an important component of brain function. While scientists argue over its effect on memory and learning, restful sleep provides energy as well as the ability to focus. Both are vital factors in achieving mental stimulation. Some studies have also shown the reverse to be true. More mental stimulation during the day equals better sleep at night.

Increase Your Exercise - Exercise brings oxygen-rich blood to the brain, an important component to overall brain health. Exercise also regulates blood sugar levels. Some recent studies have shown a correlation between impaired glucose tolerance and an undersized hippocampus, the portion of the brain that controls the conversion of short-term memory into long-term. In addition, forms of exercise such as aerobics, dance, and martial arts all require memorization and are great for promoting mental stimulation. They also help to develop the rhythm and timing circuitry that runs through multiple regions of the brain.

Play Games - Crossword puzzles, Sudoku, certain board games, and card games are great for mental stimulation. Each of them will exercise various brain functions such as lexical recall (memory for words that name things), attention, memory, logic, and pattern recognition. They are accessible to almost everyone, and some only require one player. The key here is that as you advance in skill, you should seek out harder, more challenging versions.

This Week’s Market Commentary

Monday’s bond market has opened in negative territory due to early stock strength. The stock markets are kicking the week off well into positive ground, with the Dow up 131 points and the Nasdaq up 30 points. The bond market is currently down 16/32, which will likely push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point over Friday’s morning pricing.

 

There is no relevant economic data scheduled for release today. The rest of the week brings us the release of four relevant reports for the bond market to watch in addition to two relatively important Treasury auctions and a Fed conference.

July’s New Home Sales data is the first report of the week, coming late tomorrow morning. This report is the least important release of the week. It will give us another indication of housing sector strength and mortgage credit demand, but only tracks approximately 15% of all home sales. It usually doesn’t have a major impact on bond prices or mortgage rates unless it varies greatly from forecasts. Current forecasts are calling for little change between June’s and July’s sales of newly constructed homes.

Overall, we will likely see the most activity in rates Wednesday, but Friday is also relatively important. Stronger than expected results in the economic reports and disappointing results in the Treasury sales will most likely lead to rates moving higher this week. Trading late last week hints that mortgage rates may have bottomed out for the time being. Accordingly, proceed cautiously if still floating an interest rate.