Market update

Friday’s bond market has opened in positive territory again with stocks in negative territory and mixed economic results. The Dow is currently down 41 points at 14,013 while the Nasdaq has lost 20 points as investors grow more concerned about the automatic budget cuts that kick in today. The bond market is currently up 7/32, which should improve this morning’s mortgage rates by approximately .125 of a discount point. The first of today’s three economic reports that are relevant to mortgage rates was January’s Personal Income and Outlays data 8:30 AM ET. The Commerce Department said that personal income fell 3.6% last month, the biggest monthly drop since January 1993. Although the figure is heavily distorted due the Fiscal cliff-related jump in December, it still was a much larger decline than the 2.4% that expected. The spending portion of the report revealed a 0.2% increase in spending that matched forecasts. This means consumers had less money to spend last month than many had thought and didn’t spend more than expected, making the data good news for the bond market and mortgage rates. Up next was the University of Michigan's revision to their Index of Consumer Sentiment for February just before 10:00 AM this morning. They announced a reading of 77.6 that was a little larger than the 76.3 that was posted in mid-February. The upwardly revised reading indicates that surveyed consumers were a little more optimistic about their own financial situations than previously thought. It also hints that consumers are more likely to make a large purchase in the near future than the preliminary reading indicated, making the data slightly negative for the bonds market and mortgage pricing. The Institute for Supply Management (ISM) released their manufacturing index for February at 10:00 AM ET, giving us an indication of manufacturer sentiment about business conditions. They said that the index rose to 54.2 last month, exceeding forecasts of 52.4. This means that more surveyed manufacturers felt business improved during the month than in January and that total was a little higher than many had expected. Therefore, we need to consider this data unfavorable for bonds and mortgage rates. Next week is fairly light in terms of the number of economic reports and other events scheduled that could influence mortgage rates. However, one of those releases is the almighty monthly Employment report that often causes much volatility in the markets. There is nothing of importance currently scheduled for Monday or Tuesday, so look for weekend news and budget cut talks to drive the markets and mortgage rates until we get to Wednesday. Look for details on next week’s schedule in Sunday’s weekly preview. If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now...       Alan Russell 161 South San Antonio Rd. | Los Altos, CA 95022 Ph: 650-947-2296 | Fax: 408-335-1118 alanrussell@princetoncap.com CLICK HERE TO STOP RECEIVING OUR REPORT