Monday's bond market has opened in positive territory following early stock weakness. The stock markets are showing losses with the Dow down 164 points and the Nasdaq down 28 points. The bond market is currently up 54 basis points, which should improve this morning's mortgage rates.There is no relevant news scheduled for release today, but there are several important reports due this week that are likely to affect mortgage pricing. The first piece of news comes late tomorrow morning when the Conference Board posts their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment, giving us an idea of consumer willingness to spend. This is important because consumer spending makes up two-thirds of the U.S. economy. If the CCI reading is weaker than expected, we may see bond prices rise and mortgage rates drop tomorrow. Current forecasts are calling for a reading of 50.0, which would be a lightly lower reading than June's reading.There is no relevant economic news scheduled for release Wednesday that is relevant to mortgage rates. However, there are two on the schedule for Thursday. The first is the quarterly Gross Domestic Product (GDP), which is considered to be the best indicator of economic growth. It is the sum of all goods and services produced in the U.S. and usually has a great deal of influence on the financial markets. Current forecasts are estimating a 1.8% pace. A larger increase will probably hurt bond prices, leading to higher mortgage rates. But a smaller increase would likely fuel a bond market rally.The second report of the day is the 2nd Quarter Employment Cost Index (ECI) that measures employers' costs for wages and benefits. It is considered to be an important measurement of wage inflation and can have a pretty big impact on the bond market and mortgage rates. If it shows a rapid increase, raising inflation concerns, the bond market may drop and mortgage rates rise. It is expected to reveal an increase of 0.7%.Overall, it likely will be a fairly active week in the mortgage market. With several important economic reports on tap, we will likely see noticeable movement in mortgage rates more than one day. The most important day of the week is Friday with the Employment and ISM reports being released, but Thursday's GDP release is highly important to the markets and could heavily influence mortgage pricing also.
Mel
Thursday's bond market has opened in positive territory following favorable economic news and mixed stock reactions. The Dow is currently down 94 points while the Nasdaq has gained 15 points. The bond market is currently up 22/32, which should improve this morning's mortgage rates.
The first piece of news posted this morning was the preliminary reading of the 2nd Quarter Gross Domestic Product (GDP), which is considered to be the best indicator of economic growth. It revealed a 1.9% annual rate of growth that was lower than forecasts. Today's release also revised the previous two quarters readings lower than previously announced, which dropped the last quarter of 2007 into negative growth. That was the first quarter of negative growth since 2001. Furthermore, today's release also showed a much weaker than expected reading in a key inflation reading of the data. Overall, this report was very favorable for bonds and mortgage rates.The second report of the day was the 2nd Quarter Employment Cost Index (ECI) that matched forecasts of a 0.7% rise. This index measures employers' costs for wages and benefits and is considered to be an important measurement of wage inflation. Since it met forecasts it had little impact on the bond market or mortgage pricing this morning.Also worth noting was the Labor Department's posting of last week's new claims for unemployment benefits. They were expected to say that 395,000 new claims for benefits were filed but announced that 448,000 we filed. That number is well above the benchmark 400,000 and the second consecutive week of being above it. That raises concerns in the market that the employment sector is weakening, especially with tomorrow's major report coming. If true, it would be very good news for the bond market and mortgage rates.Tomorrow mornings brings us the release of two important reports, including one of the most important reports we see each month. This report gives us the U.S. unemployment rate, number of new jobs added to the economy and the average hourly earnings reading. The ideal situation for the bond market is rising unemployment, a loss of new jobs and little increase in earnings. This report is considered to be one of the single most important releases that we see each month. While the today's GDP release can be considered the single most important report in general, it is posted quarterly rather than monthly like the Employment report. Tomorrow's Employment report is expected to show that the unemployment rate rose to 5.6% last month while approximately 75,000 new jobs were lost and a 0.3% increase in average earnings. The unemployment rate probably will not be much of a factor if the new jobs number varies from forecasts. However, due to the importance of the payroll numbers, we will undoubtedly see quite a bit of volatility in the markets and mortgage pricing.Also scheduled for release tomorrow is the Institute for Supply Management's (ISM) Manufacturing Index for July. This index measures manufacturer sentiment by surveying trade executives about business conditions during the previous month. A reading above 50.0 means that more surveyed executives felt that business improved than those who said it had worsened. It is expected to show a decline to a reading of 49.2. A smaller than expected reading would be great news for the bond market and would likely improve mortgage rates tomorrow, assuming that the Employment report doesn't give us an major surprises.
Tuesday's bond market has opened in negative territory following stronger than expected economic news and sizable stock gains. The stock markets are showing strength with the Dow up 194 points and the Nasdaq up 47 points. The bond market is currently down 31 basis points, which will likely push this morning's mortgage rates higher.This morning's economic news came from the Conference Board who posted their Consumer Confidence Index (CCI) for July. It showed a reading of 51.9 and also revised last month's final reading higher by 0.6. This means that consumer confidence was higher the past two months than many had thought. This is considered bad news for bonds and mortgage rates because consumer spending is tied to consumer confidence.There is no relevant economic news scheduled for release tomorrow that is relevant to mortgage rates. Look for the stock markets to influence bonds and mortgage rates. If stocks rise again, bonds will likely fall and mortgage rates inch higher. If stocks give back today gains, we should see mortgage rates improve tomorrow.There are two reports scheduled for release Thursday. The first is the quarterly Gross Domestic Product (GDP), which is considered to be the best indicator of economic growth. It is the sum of all goods and services produced in the U.S. and usually has a great deal of influence on the financial markets. Current forecasts are estimating a 2.3% pace. A larger increase will probably hurt bond prices, leading to higher mortgage rates. But a smaller increase would likely fuel a bond market rally.The second report of the day is the 2nd Quarter Employment Cost Index (ECI) that measures employers' costs for wages and benefits. It is considered to be an important measurement of wage inflation and can have a pretty big impact on the bond market and mortgage rates. If it shows a rapid increase, raising inflation concerns, the bond market may drop and mortgage rates rise. It is expected to reveal an increase of 0.7%.
Friday's bond market has opened in well in negative territory as traders erase a sizable rally in bonds yesterday. The stock markets are in positive territory after their large sell-off yesterday helped fuel the bond rally. The Dow is currently up 21 points while the Nasdaq has gained 30 points. The bond market is currently down 65 basis points, which will erase yesterday's late rally and prevent much of an improvement in this morning's mortgage rates.
None of today's economic news did anything to help bond prices or mortgage rates. The first was June's Durable Goods Orders that showed an increase in orders for big-ticket items of 0.8%. This was much larger than the small decline that they forecasted, indicating that the manufacturing sector may be stabilizing.
The second report was the revision to July's University of Michigan Index of Consumer Sentiment. It showed a reading of 61.2 that was well above the earlier reading of 56.6. This means that consumers w ere much more confident about their own financial situations than many had thought. That is considered bad news for bonds because higher levels of confidence usually means that consumers are more willing to make large purchases, helping to fuel consumer spending. Based on clients that I have spoken with over the last 30 days, this report is way off. I am being told routinely that most small business owners are having very poor months. So I am expecting this number to really be corrected lower in coming weeks.
The third was June's New Home Sales report, but it was the least important of the three. It showed a much higher level of sales than was expected and revealed an upward revision to May's sales numbers. Fortunately, this data is not considered to be of high importance or we may have seen bonds even lower than current levels. The important thing to take from this report is that we have the makings of a market turn around, the likes of we haven’t seen in at least a year. Lets hope this continues, then maybe banks will ease some lending restrictions allowing more borrower’s to qualify for home loans.
With exception to Monday, next week is packed with relevant economic reports. Included in the long list of reports scheduled for release is the single most important quarterly report and the arguably the most important month report. In addition, there are several other pieces of data that may influence the markets and mortgage rates next week. Look for more details next week.
Thursday's bond market has opened in positive territory following sizable stock losses and weaker than expected economic news. The Dow is down 201 points and the Nasdaq has lost 26 points. The bond market is currently up 59 basis points, which should improve this morning's mortgage rates by approximately .125% to the interest rates.Neither of today's economic releases ere considered to be high importance to the markets unfortunately, or we may have seen more of an improvement to mortgage rates. The National Association of Realtors said that home resales in the U.S. fell 2.6% last month. This was a larger drop than was forecasted. In addition, the Labor Department reported that 406,000 new claims for unemployment benefits were filed last week. This was a much larger increase than was expected and again crosses the important 400,000 benchmark.Yesterday afternoon's Beige Book release showed that economic activity slowed in most regions and that inflation continued to rise. The slowing economic activity is good news for bonds, but the inflationary pressures are a threat to bonds and could drive prices lower and mortgage rates higher if they continue to rise. Overall, it didn't reveal any significant surprises.The results of today's 5-year Treasury Note auction will be posted at 1:00 PM ET. If the auction was met with a strong demand from investors, bond prices may rise during afternoon trading and could lead to lower mortgage rates. However, if the sale was met with a poor demand, we could see bond prices fall and mortgage rates rise revise higher.Tomorrow morning brings us the release of two of the week's most important reports. The first will come from the Commerce Department when they will post June's Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for a decline of 0.3% after showing little change in new orders during May. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items. These are products that are expected to last at least three years. A stronger than expected number may lead to higher mortgage rates tomorrow morning. If it reveals a larger than expected drop, mortgage rates should improve tomorrow. Also being released tomorrow is the final revision to July's University of Michigan Index of Consumer Sentiment. Unless we see a drastic revision to the preliminary estimate of 56.6, I think the markets will probably shrug this news off.
Wednesday's bond market has opened in negative territory since there is no relevant economic data to offset early stock gains. The stock markets are in positive territory with the Dow up 24 points and the Nasdaq up 12 points. The bond market is currently up 16/32, which will likely push this morning's mortgage rates lower by approximately .250 of a discount point.There is no relevant economic data scheduled for release this morning, however, the Federal Reserve will release its Beige Book report this afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. With Fed Chairman Ben Bernanke's testimony last week, I don't think we will see any significant surprises in this report, and therefore will likely not cause much movement in mortgage rates later today.
There are two housing sector related releases scheduled for this week with the first coming tomorrow morning. Neither will likely have much of an impact on the bond market or mortgage rates. June's Existing Home Sales will be posted tomorrow morning and is expected to show a decline in sales.We have a 2-year Treasury Note auction today. It has been met with a strong demand from investors, as of this writing. Consequentially, interest rates have reacted positively to this news
Tuesday's bond market has opened in negative territory as investors remain concerned about inflation sensitive securities. The stock markets are mixed with the Dow up 34 points and the Nasdaq down 4 points. The bond market is currently down 13/32, but due to strength in bonds late yesterday we will likely see little change in this morning's mortgage rates.There is no relevant economic data scheduled for release today or tomorrow morning. This will leave the bond market and mortgage rates to be influenced by stock and oil prices. This could further pressure bonds in my opinion. I would not be surprised to see an upward revision to mortgage pricing later today if bonds remain near current levels.The Federal Reserve will release its Beige Book report tomorrow afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. With Fed Chairman Ben Bernanke's testimony last week, I don't think we will see any significant surprises in this report, and therefore will likely not cause much movement in mortgage rates tomorrow afternoon. There are two housing sector related releases scheduled for Thursday and Friday, but I don't think they will have much of an impact on the bond market or mortgage rates. June's Existing Home Sales will be posted Thursday while New Home Sales will be released Friday. I would expect that other reports or factors will drive bond trading and mortgage pricing much more than these will.We also have a 5-year Treasury Note auction Thursday that may influence bond trading but will also give us an indication of investor appetite for bonds. The market is seeking direction, at face value is looks like stocks are improving, interest rates are rising due to inflation pressure and commodities are beginning to get soft following oil down. Only time will tell if this is an ongoing direction.
Monday's bond market has opened flat after this morning's only economic news met forecasts. The stock markets are showing losses with the Dow down 46 points and the Nasdaq down 6 points. The bond market is currently unchanged form Friday's close, but we will still see an increase in this morning's mortgage rates of approximately .250 of a discount point due to weakness late Friday.The Conference Board reported that their Leading Economic Indicators (LEI)for June fell 0.1%, as latest forecasts had called for. This index attempts to measure economic activity over the next three to six months, meaning economic activity may remain flat in the near future. This is basically good news for bonds and mortgage rates.This week will be interesting for the bond market and mortgage rates. There are five remaining economic reports scheduled for release, but only one of them is considered to be of high importance to the markets. With data being posted all bu t one day of the week, we may see some noticeable fluctuations from day to day in mortgage pricing.The Federal Reserve will release its Beige Book report Wednesday afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. With Fed Chairman Ben Bernanke's testimony last week, I don't think we will see any significant surprises in this report, and therefore will likely not cause much movement in mortgage rates Wednesday afternoon. Overall, this is a moderately significant week for the bond market and mortgage rates. If we get weaker than expected economic results, we may see mortgage rates move lower for the week. However, stronger than expected results will likely lead to higher rates for the week. We also have a 5-year Treasury Note auction Thursday that may influence bond trading but will also give us an indication of investor appetite for bonds.
Friday's bond market has opened well in negative territory as investors continue to shy away from inflation-threatened securities. The stock markets are mixed during morning trading with the Dow up 38 points and the Nasdaq down 23 points. The bond market is currently down 21/32, which will likely push this morning's mortgage rates higher by another .375 of a discount point. Bonds were as negative as 60 basis points, so it seems we have found a floor for bonds because rates are improving as I write these words.
Oil was also down for a third day which has been helping the stock market. Earning season for the stock market is just underway, my feeling is next week will start bringing surprises, which should help bonds to at first stabilize and maybe start improving. Just my insight, but I thing we are seeing the slowing economy starting to effect the markets, commodities might have peaked in this cycle. Let’s hope I am right, it would be great if inflation would start to ease.There is no relevant economic data scheduled for release today, but this morning's bond losses don't come as a surprise. It appears that the sentiment in the bond market has turned more pessimistic than optimistic, partly due to inflation concerns. That has led to bonds and long-term securities becoming of less interest to investors. The result is bond prices falling as they are sold and mortgage rates rising. Unfortunately, I am not so sure that this is the end of the selling, so please be careful if still floating an interest rate.There are a couple of reports scheduled for release next week that are relevant to mortgage related bonds and rates. However, none are considered to be of extremely high importance to the markets. The first comes Monday morning with the release of June's Leading Economic Indicators (LEI). This report is considered to be moderately important to the markets. The rest of the week brings is insight to housing sales, manufacturing activity for big-ticket items and the Fed Beige Book that breaks down economic activity in the U.S. by region. Look for more details on these and the rest of the upcoming week's events in Sunday's weekly preview.
Thursday's bond market has opened in negative territory as stocks continue their upward move and inflation concerns make bonds less attractive to investors. Yesterday's rally in stocks seem to be carrying over into this morning's trading with the Dow up 58 points and the Nasdaq up 7 points. The bond market is currently down 75 basis points, which with yesterday's late selling will likely push this morning's mortgage rates for a conforming loan to 6.375%.The minutes from the last FOMC meeting did raise some concern in the bond market yesterday and helped fuel the stock rally. Some of excerpts included indications that the Fed's next move would likely be an increase to key short-term interest rates rather than another rate cut. This means that the Fed is more worried about inflation than a slowing economy. Since inflation erodes the value of a bond's future fixed interest payments, this news sent mortgage related bonds lower and mortgage rates higher.Today's only relevant data was June's Housing Starts report that surprised many by showing an increase in starts of new homes. It was expected to show another decline in starts. However, this data is not considered to be of high importance and has not had much influence on today's trading or mortgage pricing.The Labor reported that 366,000 new claims for unemployment benefits were filed last week. This was an increase from the previous week, but not as high as analysts had expected. However, since this data tracks only a week's worth of claims it also hasn't affected mortgage rates this morning.There is no relevant economic data scheduled for release tomorrow, meaning that stocks will likely heavily influence bond trading and mortgage rates. With this week's volatility, we could see traders adjust portfolios ahead of the weekend. That could lead to further volatility in bonds and mortgage rates again tomorrow.
Wednesday's bond market has opened in negative territory again after this morning's economic data revealed stronger than expected readings. The stock markets seem to be having little reaction to the news with the Dow up 4 points and the Nasdaq nearly unchanged. The bond market is currently down 15/32, which will likely push this morning's mortgage rates higher by approximately .375 of a discount point.
The big news this morning was June's Producer Price Index (PPI) from the Labor Department. They reported that the overall CPI reading rose 1.1% while the core data rose 0.3%. Both of these readings exceeded forecasts, indicating that inflationary pressures were more of a threat at the consumer level of the economy than many had thought.
June's Industrial Production data was also released this morning. It showed an increase in output at U.S. factories, mines and utilities of 0.5%. This was much stronger than the 0.2% increase that was expecting, meaning manufacturing activity was higher than thoughts. This is considered bad news for the bond market and mortgage rates.
Part two of Fed Chairman Bernanke's testimony on the economy is being made to the House Financial Services Committee. I am not expecting his words to impact bonds or rates this morning unless something in the question and answer portion surprises us.
The minutes from the last FOMC meeting will be posted later today. There is a possibility of the markets reacting to them following their 2:00 PM ET release, especially if they show some divisiveness by its members during discussion and voting at the last meeting. I am not expecting to see a change in rates as a result of them, but a possibility does exist.
Tomorrow's only relevant data is June's Housing Starts report. This data gives us an indication of housing sector strength, but is not considered to be of high importance. Analysts are currently expecting to see a small decline in new starts of housing projects. However, I don't see this data having much of an impact on mortgage rates tomorrow unless it varies greatly from forecasts.
Tuesday's bond market has opened in positive territory again as the volatility in stocks continues. The stock markets are in negative territory with the Dow down 106 points and the Nasdaq down 28 points. The bond market is currently up 18/32, this means that loan rates will improve today.
The Labor Department gave us June's Producer Price Index (PPI) this morning, saying that prices rose 1.8% last month. This exceeds the 1.3% increase that was forecasted. However, the core data reading of 0.2% that excludes more volatile food and energy prices fell short of forecasts. This means that food and energy prices spiked more than expected, but since core prices did not rise as much as thought that data is being considered favorable for bonds.
June's Retail Sales report was also released today, showing a 0.1% increase in sales when analysts had predicted a 0.4% rise. This was lower than expected and indicates that consumers are being more frugal than thought. That is good news for bonds because consumer spending makes up two-thirds of the U.S. economy.
Fed Chairman Bernanke's testimony before the Senate Banking Committee this morning did not reveal any significant surprises. He indicated there was concern about the housing market along with energy costs and their impact on the economy, saying that they could drag on the economy the remainder of the year. He will likely repeat the same testimony tomorrow before the House Financial Services Committee. I am not expecting his words to impact bonds or rates tomorrow unless something in the question and answer portion surprises us.
Tomorrow brings us the release of June's Consumer Price Index (CPI). It is a mirror of today's PPI with the exception that the CPI measures inflation at the more important consumer level of the economy. Analysts have forecasted a 0.7% increase in the overall index and a 0.2% rise in the core data. The core data is considered to be the key reading because it excludes more volatile food and energy prices, giving us a more stable measure of inflation. Higher than expected readings could raise inflation fears and push mortgage rates higher tomorrow.
June's Industrial Production data will also be posted tomorrow morning. This data measures output and U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength. It is expected to show a 0.2% rise in production, indicating that the manufacturing sector showed moderate growth during the month. A smaller than expected increase would be good news and could help push mortgage rates slightly lower tomorrow.
Also worth noting is the release of the minutes from the last FOMC meeting. There is a possibility of the markets reacting to them following their 2:00 PM ET release tomorrow, especially if they show some divisiveness by its members during discussion and voting at the last meeting.
This week brings us the release of six important economic reports for the bond market to digest. Several of these reports are considered to be of high importance, meaning we will likely see volatility in the financial markets and mortgage pricing over the next several days. There are also plenty of corporate earnings releases scheduled for the stock markets this week along with the minutes from the last FOMC meeting. Throw in a couple of days of Fed testimony and we have the makings for a very interesting week.The first piece of data comes Tuesday morning with the release of June's Producer Price Index (PPI). The PPI is very important because it measures inflationary pressures at the producer level of the economy. It is expected to show a 1.3% increase in the overall reading and a 0.3% rise in the core data reading. The bond market should react quite favorably to weaker than expected readings, but a bigger than expected jump in the core reading could send mortgage rates higher Tuesday.June's Retail Sales report will also be posted Tuesday. The Commerce Department is expected to say that sales at retail establishments rose 0.3% last month. This data is considered to be of high importance because it measures consumer spending. Consumer spending makes up two-thirds of the U.S. economy, so any related data is watched closely. A smaller than expected increase in sales could help fuel a bond rally and lead to lower mortgage rates, depending on the results of the PPI report.
Friday's bond market has opened well in negative territory despite significant stock losses. The major stock indexes are falling as investors fear that mortgage giants Fannie Mae and Freddie Mac are on the brink of collapse, renewing housing and credit concerns. The Dow is currently down 128 points while the Nasdaq has fallen 23 points. The bond market is currently down 34 basis points, which means interest rates are rising today.
Neither of today's economic reports were that important to the markets. The first of the two showed that the U.S. trade deficit fell to $59.8 billion in May when it was expected to rise. The University of Michigan Index of Consumer sentiment for July came in at 56.6. This was a slight increase from June's final reading when it was expected to fall nearly a point. That means that consumers were more optimistic about their own financial situation than many had thought, which is considered a negative for bonds and mortgage rates.
Despite the difference between forecasts and actual results, this morning's economic data really has played little part in the market's direction today. Concerns that the government may need to take over or bail out Fannie and Freddie is the source of today's volatility. It's hard to say whether this will end up being a positive or negative for mortgage rates. But it is a fairly safe bet that we will see plenty of volatility in the markets are public comments made, news releases are posted and the almighty rumor mill kicks into high gear. Accordingly, be careful if still floating an interest rate.
Next week brings us plenty of important economic news for the markets to digest. Some of the key reports will give us inflation readings at the producer and consumer level of the economy and retail level sales from last month, along with the minutes from the last FOMC meeting. However, none of these releases come until the middle and latter part of the week so I am expecting the stock markets and related news to be a major influence on bond trading and mortgage rates the first couple of days. Look for more details on next week's events in Sunday's weekly preview.
Have a safe weekend.
Mortgage Bonds have advanced sharply in trading on the heels of a speech by Fed Chairman Ben Bernanke. Interest rates have improved.
Bernanke, in a keynote speech to open the FDIC Mortgage Lending Forum, said the Fed is considering extending their Term Auction Facility program to investment banks through the end of the year. The program, designed to provide emergency loans to liquidity strapped investment banks in order for them to overcome credit problems and ease the credit crisis, is presently scheduled to expire in the middle of September. Bernanke also said the Fed would be issuing new rules to protect home buyers from predatory lending practices in an effort to avoid a repeat of the current mortgage crisis.
Pending Home Sales for May were down -4.7%, a bit worse than estimates of -2.8%. However, the prior month's number was revised higher to 7.1% from the previously reported 6.3%. This report is not a big surprise, and indicates the housing market is not out of the woods just yet.
Overall the bond markets liked what it saw today extending a 2 day rally in bonds, just maybe we will get back under 6% interest rates if this rally continues. Oil is down almost $8 over the last two trading days, earnings season is about to begin and this doesn’t bode well for the future direction of stocks. Stay tune, times are about to get bumpy.
It looks like Indy Mac Bank is about to eat it, they just closed down their mortgage division sighting a lack of liquidity. If you have money in their bank my suggestion is to move it now. It doesn’t sound like they will be around much longer.
Today stocks started strong out of the gate but sold off quickly. On the other hand mortgage bonds started soft and improved as the session went on. Oil dropped because Iran was more conciliatory about the country’s nuclear program. Finally, the dollar strengthened based on the fact that the Group of 8 were meeting, nobody wanted to go against this meeting till they hear their comments regarding the dollar and what they plan to do about it.
San Francisco Fed President Janet Yellen spoke today at the University of California-San Diego at 11:00 ET. She followed the company line and said nothing inflammatory about inflation, her comments helped Bond prices.
Earnings season for Stocks begins tomorrow, which typically adds volatility to an already jittery Stock market. And as Stocks become more volatile, so will Bonds.
The big meltdown that I was expecting on Thursday when the ECB raised interest rates in Europe did not occur largely because of comments by their leaders not suggesting that they were commited to more rate increases, they were going to wait and see before moving again. This was good news because our rates could have risen sharply.
Because the market will be closed Friday for 4th of July celebration, the Fed will release the unemployment report on Thursday. If the ADP Employment report is to be believed at all, they are reporting job losses of 79,000 for the month of June. The ADP report is rarely correct, so I am not sure what to believe. Most pundits are expecting job losses for the month of 60,000, so if the numbers come in under 60,000 this will be positive for stocks, if it comes in higher than 60,000 this will be positive for bonds and interest rates might improve.
In my personal opinion, the biggest market mover this week will be if the ECB raises short term interest rates in Europe on Thursday. I know the Treasury Department and its equivalent in England have been suggesting thru the press that the ECB shouldn’t raise rates tomorrow.
As I mentioned yesterday, if they raise rates it will trash the dollar, oil will rise, stocks fall and long term interest rates will start rising. So every segment of the economy will take a hit. Won’t that be a fun day to go into a 3 day weekend. The proverbial crap will hit the fan – duck for cover.
It is reported that Israel could be more likely to attack Iranian nuclear facilities this year, a U.S. Defense Department official told ABC News. An Israeli strike might be triggered by the production of enough enriched uranium at Iran's Natanz nuclear plant to make a bomb, ABC cited the official as saying. As if Israel would announce to the world that they were planning to do this, just more bull being circulated to help keep the price of oil up in a slow business week. If anything it is early warning signs only.
To me this week is about whether or not the ECB will raise rates in Europe. If that occurs and the Fed does not follow up with an equal rate increase in American, we will be in for another round of Dollar bashing and higher oil prices. Stay tune, let’s see how this plays out.