MBS prices are up on the session (FNMA 4.50 +4/32), but currently trading sideways. Jobless Claims came in lower than expected (521k vs. 540 est.), although not by much. Wholesale Inventories were worse than expected (-1.3% vs. -1.0 est.). The stock market is in rally mode again today (Dow +100.13, S&P +12.01) on strong earnings, a weakening dollar, and not-so-bad Initial Claims. Yesterday's 10 year Treasury Auction was strong (3.01 bid-to-cover, 47.4% foreign bidder take), but today's 30 year showing was not so great (2.37 bid-to-cover, 34.5% foreign bidder take). So, we saw a weak rally surrounding the 10 year results, but there will likely be no follow-through on today's less-than-stellar 30 year offering. But, we will likely not see a near-term sell-off either.
Tomorrow, Friday, 10/9 has little data and auctions are over for the week. The lone data point tomorrow is the Trade Balance (est. -32.9 Bil.). The Trade Balance print measures the difference between US imports and exports of goods and services. Surprises here can influence estimates on GDP and other broad economic measures. Large disparities in the Trade Balance number may move rates. However, lately, no real rate movement has come following the Trade Balance print.
Earnings season has begun. If you recall from our discussion last season, earnings reports are a strong driver of market movement. With expectations beaten down in the midst of our worst recession in 75 years, eyes will be on these earnings reports for signs of improving business conditions. Also recall that headlines indicating that companies are "beating" earnings expectations may be misleading as we have to remember that many companies will intentionally look to lower earnings expectation, so they may ensure a "win". That's not to say that earnings releases should be ignored; they should just not be given too much weight. A win is a win, as they say, but keep it in the context of a weak market and weak expectations. In any case, a strong earnings season is likely to prolong the current bull market in stocks, thus putting upward pressure on rates. Weak earnings may keep rates in check, as the FED will be less likely to raise rates if business is slow and inflation is contained.
Will Staney
Sr. Mortgage Banker
WJ Bradley Mortgage Capital
12444 Research Blvd. Ste. 103
Austin, TX 78759
(512) 377-1468 Office
(512) 644-1587 Cell
(866) 953-0155 Fax
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