Forecast for the Week

It will be a holiday shortened week in the markets as Thanksgiving is celebrated, but there are several important reports that could determine which direction Bonds and home loan rates move. On Tuesday, the Gross Domestic Product (GDP) Report will be released, and on Wednesday we will get the details on the Fed's favorite gauge of inflation, the Core Personal Consumption Expenditure (PCE) data, from the Personal Income report. Given the Fed's recent talk of deflation, it will be important to see what these reports reveal.

Also on Wednesday, we'll get a read on consumer and business consumption and buying behavior from the Durable Goods Report. Durable goods are items that are non-disposable, like cars, furniture, appliances, games, cameras, business equipment, etc. In addition, we'll get a read on the housing market with Monday's Existing Home Sales Report and Wednesday's New Home Sales Report.

Stocks hit some important technical support last week, and bounced higher on Friday, with the rally being boosted by the appointment of incoming Treasury Secretary Timothy Geitner. Some follow through to the upside in Stocks could pull money out of Bonds and cause some short term worsening of home loan rates...but if deflation starts grabbing more headlines, smart money will be headed towards Bonds, which will help home loan rates improve.

Keep an eye out for words from SEC Chairman Chris Cox, who must comment on some potential easing to "mark-to-market" accounting before January 2nd. If there is indeed some easing in mark-to-market accounting - which accelerated the financial crisis - it could set off a significant...perhaps very significant...rally in Stocks, which may temporarily hurt Bonds and home loan rates.

The Bond market will be closed on Thursday in honor of Thanksgiving, and will also be closing early at 2:00pm ET on both Wednesday and Friday. I wish you and your family a very happy Thanksgiving!