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Events
This Week:
Jobless
Claims Down
Inflation
Low
ISM
Services Fell
Manufacturing
Mixed
Events
Next Week:
Wed
7/14
Retail Sales
FOMC Minutes
Thur 7/15
PPI
Industrial Prod.
Fri
7/16
CPI
Sentiment
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Rates
Remain Low
With
very little economic news during the short holiday week, mortgage rates
remained at the lowest levels in decades. While mortgage rates ended the
week slightly lower, the level of volatility in mortgage markets and other
financial markets was relatively high. Even without major news, sudden
movements in rates were common during the week. The stock market displayed
similar price swings, as the Dow recovered the roughly 400 points it lost
the prior week. This volatility in financial markets reflects the high
level of investor uncertainty about the pace of global economic growth.
The
current low mortgage rates can be attributed to a couple of factors. One is
that inflation is under control and is expected to remain low for quite a
while. Another is that demand for mortgage-backed securities (MBS) is high.
When packaged and sold as government guaranteed MBS, mortgages are viewed
as safe investments, much like US Treasury securities, and safety has been
important to investors in these uncertain times. With financial regulatory
reform behind them, Congress is now beginning to consider the appropriate
role for the government in the housing market. Central issues include
government guarantees for mortgages and the future of Fannie Mae and
Freddie Mac. The debate is expected to be long and difficult, with no easy
answers.
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Also Notable:
- Weekly Jobless Claims dropped to the lowest level
in two months
- As expected, the European Central Bank (ECB) made
no change in rates
- The Treasury will auction $69 billion in 3-yr,
10-yr, and 30-yr securities next week
- The Fed's Fisher suggested that the main economic
challenge is building confidence
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Average
30 yr fixed rate:
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Last
week:
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-0.05%
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This week:
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-0.02%
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Stocks
(weekly):
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Dow:
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10,100
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+400
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NASDAQ:
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2,175
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+75
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Week
Ahead
The
most significant economic data next week will be the monthly inflation
reports. The Producer Price Index (PPI) focuses on the increase in prices
of "intermediate" goods used by companies to produce finished
products and will come out on Thursday. The Consumer Price Index (CPI), the
most closely watched monthly inflation report, will come out on Friday. CPI
looks at the price change for those finished goods which are sold to
consumers. In addition, The Retail Sales report will be released on
Wednesday. Retail Sales account for about 70% of economic activity. The
detailed FOMC Minutes from the June 23 Fed meeting will also come out on
Wednesday. Industrial Production, an important indicator of economic
growth, is scheduled for Thursday. Empire State, Import Prices, Leading
Indicators, the Trade Balance, Consumer Confidence, and Philly Fed will
round out the week. There will be Treasury auctions on Monday, Tuesday, and
Wednesday.
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