Tuesday, November 23, 2010

Market UpDate

Tuesday’s bond market has opened in positive territory again after news of the Korean conflict raised fears of further instability in the world markets. The stock markets have reacted negatively with the Dow down 145 points and the Nasdaq down 33 points. The bond market is currently up 19/32, which should improve this morning’s mortgage rates by approximately .125 - .250 of a discount point.
There were two relevant economic reports posted this morning. The initial revision to the 3rd Quarter Gross Domestic Product (GDP) was the first, showing a 2.5% annual rate of economic growth during the third quarter. This was a little higher than forecasts and a fairly sizable increase from the previous estimate of 2.0%, meaning economic activity was stronger than many had thought. This is bad news for the bond market and mortgage rates because long-term securities such as mortgage-related bonds are more attractive to investors in a weak eco nomic and low inflation environment. Still, to the benefit of mortgage shoppers the Korean news is taking center stage, at least during morning trading.

The National Association of Realtors reported late this morning that home resales fell 2.2% last month, nearly matching forecasts. This can be considered relatively favorable news for the bond market and mortgage rates because it indicates the housing sector remains weak. Since a weak housing sector makes a broader economic recovery more difficult, today’s results are good news. However, since there was little variance from forecasts and this data is not considered highly important, its impact on this morning’s rates has been minimal.

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