Economic Reports Paint Reality: If this is recovery, why doesn't it feel better?

While last week was full of economic news with a big impact on the financial markets, this week is looking to be even bigger. The theme for the past 5 days was weak economic recovery. This was particularly seen in housing numbers and consumer confidence, both much lower than expected. Even the GDP adjusted number, which came in for Q4 2009 at its highest measure in years, was universally received as a negative because the consumer spending number was non-existent and only a restocking of the shelves accounted for business spending and "growth". The result was a quick downturn in the stock market and a "flight to quality", found in Treasuries and MBS; enough of a flight to buoy up the Treasury auctions. That led to Commercial lending rate indices like the 5-year Swaps and 10-yr treasury yield dropping 16 basis points to 3.62% and residential, conventional conforming 30-year fixed rates dropping again to 4.750% for the price of an origination and normal closing costs. If you are a fan of Ben Bernanke and the Fed, you may want to read his prepared remarks before congress by clicking here.

So why is this week's economic news important?

• Jobs. On Wednesday we'll get the first hint of February jobs results with the ADP report on private sector with expected -35k.
• Jobs. Thursday's initial jobless claims report is expected to be 475,000, in line with the 4-week average.
• Jobs. The gov't reports are out on Friday and expect the Cheerleader in Chief to be celebrating a <10% number. But if the number isn't much worse than January it will be recognized as a temporary blip up for Census jobs. On the other hand, weather on the east coast is likely to have tanked the numbers by at least 50k, so a surprise for the worse and possibly even 10% unemployment again is about 50/50.
• Inflation. The Fed's most-watched gauge of inflation is the PCE due out this morning.
• Construction. The freefall is expected to continue in January numbers due out this morning, making it the 9^th consecutive drop.
• Homes. Thursday will bring the pending home sales index. Last week's New- and Existing-Home Sales numbers were awful falling 11 and 7.7% from a weak December number. But today is the first of March...

- 60 days left to get into a firm contract on a home purchase and qualify for the First-Time Homebuyers Tax Credit! Of course you know that even "move-up" buyers can qualify for the credit. Please feel free to give us a call if you have any questions about the qualifications and the nitty gritty of squeezing into the deadline, or by clicking here.

- 30 days left for the Fed buying MBS on the open market. This will cap the $1.25 Trillion investment program which today sits already at $1.206 T. Only $44 Billion to go (when does $44 Billion have an "ONLY" in front of it?) Sorry! While we don't expect a huge ceremony, we do know this flame will be doused. Because of the contract timing on mortgage purchases, we expect to start seeing a slight impact to residential mortgage rates by the middle of March as this portion of MBS demand is seen going away.

In the meantime, rates are as good as they have been in all of 2010 right now. We locked in fantastic rates available at the end of the week. These days, more than ever, experience counts. Let us help you, your friends and family understand the markets and take advantage of the opportunities. Make it a great week!