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Events
This Week:
Existing
Sales Fell
Housing
Starts Down
Jobless
Claims Rose
Manufacturing
Mixed
Events
Next Week:
Mon
7/26
New Home Sales
Wed
7/28
Durable Orders
Beige Book
Fri
7/30
GDP
Chicago PMI
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"Unusually
Uncertain"
Mortgage
rates moved even lower during the week, as uncertainty about the pace of the
economic recovery has increased investor demand for relatively safer assets
such as government guaranteed mortgage-backed securities (MBS). The Fed
Chairman acknowledged during the week that the economic outlook is even
more difficult than usual to predict right now. Uncertain economic growth
with low inflation is a favorable environment for mortgage rates.
In his
semi-annual testimony to Congress, Fed Chief Bernanke described the
economic outlook as "unusually uncertain". According to Bernanke,
this is the worst labor market since the Great Depression, and it is
recovering more slowly than expected. Still, the Fed forecasts modest
economic growth in 2010 with low inflation. Important for mortgage rates,
Bernanke expressed reluctance to provide further monetary stimulus, unless
the economy falters badly. He suggested that the upside of additional Fed
actions may be limited, while the downside is that it would raise future
inflation expectations.
In the
housing sector, June Existing Home Sales declined 5% from strong May levels
to an annual rate of 5.37M units, which was well above the consensus
forecast of 5.10M. Existing sales were 10% higher than one year ago.
First-time buyers accounted for 43% of existing home sales in June.
Existing home sales have been helped in recent months by the homebuyer tax
credit. Even with the end of the tax credit, though, the National
Association of Realtors (NAR) expects annual existing home sales to
increase in 2010 and to rise further in 2011.
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Also Notable:
- June Housing Starts fell 5% from May, while
Building Permits rose 2%
- The Labor Dept. reported that that unemployment
rate fell in 39 states in June
- The Treasury will auction $104B in 2-yr, 5-yr,
and 7-yr securities next week
- Lawmakers passed a bill to restore extended
unemployment benefits
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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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10,300
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+100
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NASDAQ:
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2,250
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+25
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Week
Ahead
The
most important economic report next week will be Friday's release of Gross Domestic
Product (GDP) for the second quarter. GDP is the broadest measure of
economic activity. Before that, New Home Sales will come out on Monday.
Durable Orders, another important indicator of economic activity, will be
released on Wednesday, along with the Fed's Beige Book. The Chicago PMI
national manufacturing index will come out on Friday. Consumer Confidence
and Consumer Sentiment will round out the schedule. There will be Treasury
auctions on Tuesday, Wednesday, and Thursday.
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