Mel's Blog

Wednesday's bond market has opened down slightly following early stock gains and a much stronger than expected manufacturing report. The stock markets are showing early strength with the Dow up 43 points and the Nasdaq up 35 points. The bond market is currently up 18/32. The Commerce Department reported this morning that Durable Goods Orders rose 1.8% last month. This was much stronger than the 0.9% decline that was expected and the third increase in orders out of the past four months. This indicates that manufacturing activity, at least in big-ticket items such as machinery, vehicles and electronics, is strengthening quicker than many had thought. This would be considered bad news for bonds and mortgage rates. May's New Home Sales was also released this morning, showing that sales of newly constructed homes fell slightly last month. Analysts were expecting to see a small increase in sales. However, this data only represents approximately 25% of all home sales, so its impact on trading and mortgage rates is usually minimal unless its results vary greatly from forecasts. This week's FOMC meeting will adjourn at 2:15 PM ET today. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting. But, market participants will be looking at the post-meeting statement for any hint of what and when the Fed's next move may be. Look for an update to this report shortly after the markets have an opportunity to react to what the Fed says. The only relevant economic data scheduled for release tomorrow is the final reading to the1st Quarter GDP and weekly unemployment claims. The GDP data is quite aged now (covers January through March) and will likely have little impact on the bond market or mortgage pricing unless it varies greatly from previous readings. Last month's first revision showed a 5.7% decline in the GDP. This month's second and final revision is expected to show the same decline.