Mortgage Headlines
Mortgage Rates Remain High
With no economic news on the docket, the financial markets drifted Monday as they waited for a slew of upcoming economic reports that begin to filter in on Tuesday. U.S. Treasury securities weathered a bout of selling as traders fretted about signs of inflation and grew uneasy prior to some key indicators. Selling in 10-year notes also may have erupted in the wake of a big post-auction rally on Friday. There is also anxiety amongst traders over the departure of Fed chairman Alan Greenspan, who has been at the helm for 18 years. His nominated successor Ben Bernanke appears before the Senate Banking Committee on Tuesday. Although there is little doubt that Bernanke will be confirmed, traders are often apprehensive about change, especially one of such magnitude.
Vigorous selling today sent Treasury prices down and their yields, which move in the opposite direction of prices, up even further. Higher yields, which lenders use as a guide to set mortgage rates, influenced them to edge rates up on some products.
Lack of Direction Leaves Stocks Flat
With no economic news for guidance stocks traded flat to down, with only the Dow Jones Industrials eking out a positive close. Corporate news was mixed, helping some shares post gains while driving others down. Retailers Wal-Mart and Lowe's closed to the upside, with Wal-Mart reporting strong earnings and Lowe's rising 5 percent on word of a 26 percent increase in profits. Georgia-Pacific's stock soared 38 percent after announcing Koch Industries would buy it, and Knight-Ridder added 2 percent after stating that the company may be for sale.
On the other hand, Hewlett-Packard and Motorola fell after receiving downgrades, and Marriott Hotels sold after announcing it would buy 38 luxury hotels from Starwood Group. Tyson Foods lost 9 percent after reporting lower third-quarter profits and announcing it would miss 2006 earnings forecasts. Abbott Labs also sank on word of disappointing trials for a new drug. This put pressure on the pharmaceutical sector.
At 4:00 p.m. EST:
The Dow 30 Industrial Index rose 11.13 points (+0.10 percent) to 10,697.17; the Nasdaq Composite index closed down 1.52 points (-0.07 percent) to 2,200.95, and the benchmark Standard & Poor's 500 Index shed 0.96 points (-0.08 percent) to 1,233.76.
The 30-year Treasury bond fell 27/32 in price with the yield rising to 4.80 percent from 4.75 percent on Friday.
The 10-year Treasury note lost 6/32 in price with the yield climbing to 4.60 percent from 4.56 percent on Friday.
The 5-year Treasury note was down 9/32 in price with the yield rising to 4.54 percent from 4.48 percent on Friday.
At 4 p.m. EST on Monday, AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:
The 30-year Conventional Fixed-Rate Mortgage was at 6.128 percent versus6.103 percent late on Friday.
The 15-year Conventional Fixed-Rate Mortgage was at 5.676 percent comparedwith 5.648 percent late on Friday.
Coming Up:
The parade of significant economic reports begins on Tuesday with three high-profile releases. Of major importance to bond traders is the October Producer Price index (PPI), which tracks wholesale prices and looks for signs of inflation - a constant source of concern for Treasuries. Analysts are expecting the PPI to increase 0.1 percent and the core rate, which eliminates volatile food and energy prices, to grow by only 0.2 percent. If the predictions are on target, they would support Treasuries.
Also on tap are Retail Sales for October and the November manufacturing index from New York. Retail sales are expected to have fallen 0.6 percent due to weak auto sales. When these sales are eliminated, however, retail numbers should increase 0.3 percent -- far weaker than the 1-percent plus gains made in September. The NY Empire State index is estimated to come in at 15, which would exceed the 12.1 reported in October.
Low numbers should limit selling in Treasuries, but concerns about inflation will continue to flourish until all the economic data this week are known. And the sizable gains in Treasury yields today will force mortgage lenders to keep rates at elevated levels.
Carolyn Siegel
carolyn@interest.com
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