Daily commentary shows market opening off ahead of Fed day

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Wednesday’s bond market has opened in negative territory as investors prepare for today’s Fed calendar and react to this morning’s housing data. The stock markets are showing early gains with the Dow up 46 points and the Nasdaq up 2 points. The bond market is currently down 10/32, but due to strength in trading late yesterday we should see little change in this morning’s mortgage rates. We technically had three reports posted early this morning but they were all the same, just covering different months. The Commerce Department announced that September’s Housing Starts fell 2.0%, rose 1.8% in October and jumped 22.7% last month. The decline in September was a surprise and October’s increase wasn’t too far off from forecasts. November’s rise greatly exceeded expectations, indicating solid growth in the new home portion of the housing sector. Since September’s data is aged now and not nearly as relevant as last month’s starts, we should consider the news negative for the bond market and mortgage rates as it points towards economic strength. The Fed will adjourn their two-day FOMC meeting at 2:00 PM ET today. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting, but traders and analysts are anxious to get the Fed's current economic forecasts and any word of a potential reduction in the Fed’s current bond buying program. Also worth noting is that the meeting is ending earlier than the traditional 2:15 PM because it is one of the meetings that will be followed by updated economic forecasts from the Fed and a press conference hosted by Chairman Bernanke. The forecasts will be posted at 2:00 PM and the press conference will begin at 2:30 PM. It is fairly safe to assume that all of this will lead to afternoon volatility in the markets and mortgage rates today, so be careful and attentive if still floating an interest rate. Tomorrow has three pieces of economic data scheduled for release (November’s Existing Home Sales and Leading Economic Indicators along with last week’s unemployment figures), but none are considered highly important to the financial markets. The housing report will be worth watching and unemployment filings are expected to show a sizable drop. However, I would be surprised to see any of the data have a significant impact on tomorrow’s rates. We will address each report in more detail in this afternoon’s update shortly after the markets have an opportunity to react to the Fed events. 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... Lock 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