This holiday-shortened week brings us the release of only one monthly economic report for the markets to digest. This will likely leave the stock markets to be a major influence on bond trading and mortgage rates a good part of the week. Whether this is good or bad news for bonds depends if stocks rally or fall. If stocks move higher, bonds will likely suffer, leading to higher mortgage rates. However, if stocks show weakness, funds may shift into bonds, driving mortgage rates lower.

The financial markets are closed today in observance of the Martin Luther King Holiday. They will reopen tomorrow morning for regular trading hours. I don't believe many mortgage lenders will be open today, but any that are will likely use Friday's rates or not allow a rate to be locked today.

The only monthly report is Thursday's release of December's Existing Home Sales data. The National Association of Realtors will release this information. It gives us a measurement of housing sector strength by tracking home resales during the month. It usually is not considered to be of much importance, but since it is the week's only monthly release it may influence bond trading more than usual.

Also Thursdays is the Labor Department's weekly update on unemployment filings. They are expected to show that after last week's surprise dr op, new claims rose back to 325,000 last week. A smaller number is considered negative for bonds while a larger than expected rise is positive. But, this data is also not considered to be of high importance. Since it is one of the only two reports released at all, it may influence trading some but not enough to affect mortgage rates.

Overall, I am expecting a very quiet week in the mortgage market. As long as the stock markets remain fairly calm, mortgage rates will probably close the week very close to tomorrow's opening levels.

WEDNESDAY AFTERNOON UPDATE:

The first FOMC meeting of the year has adjourned with news of another cut to key short-term interest rates. In addition to last week's surprise .750 reduction, the Fed dropped them another .50 of a discount point at this meeting. The move didn't surprise some but did surprise others. The move has been met with mixed reactions in the markets. The major stock indexes are posting stronger gains with the Dow now up 160 points and the Nasdaq up 29 points. However, the bond market has not reacted as well. It is currently down from this morning's levels, possibly pushing mortgage rates higher this afternoon.

The post-meeting statement indicated that there was still concern about economic weakness and hinted that more rate cuts could come as a result. They did lightly mention that inflation is being watched closely, but that is more or less a given in this economy.

So, why the negative reaction in bonds? I can't exactly say for sure, but I suspect it has more to do with stock advances than with concerns about inflation and threats to bonds. The recent volatility in the stock markets had pushed significant funds into bonds as a safe-haven. We may be seeing those funds exit for higher yields in stocks. Fortunately, this will likely be a short-term issue. However, until the markets stabilize, I am holding the current lock recommendations.

Today's preliminary reading of the 4th Quarter Gross Domestic Product (GDP) revealed an annual growth rate of 0.6%. That was half what analysts were expecting to see and indicates that the economy was in much worse shape than many had thought during the last three months of last year. This is good news for the bond market and mortgage rates as it eases inflation concerns that hurt long-term securities such as mortgage related bonds.

The 4th Quarter Employment Cost Index (ECI) is scheduled for release early tomorrow morning. It measures employer costs for employee wages and benefits, giving us an indication of the threat of wage inflation. It usually has more of an effect on the bond market than the stock markets. Current forecasts are showing an increase of 0.8%. A lower than expected reading would be favorable to bonds and mortgage rates.

Also tomorrow morning is the release of January's Person al Income and Outlays report. This data gives us an indication of consumer ability to spend and current spending habits. Current forecasts call for an increase in income of 0.4% while spending is expected to rise 0.1%. Larger increases would be good news for the stock markets and could hurt bond prices, driving mortgage rates higher early tomorrow. Smaller than expected increases should help push mortgage rates slightly lower, assuming the ECI doesn't give us a negative surprise.

Friday's bond market has opened in positive territory, recovering some of yesterday's losses. The stock markets are showing modest gains with the Dow up 3 points and the Nasdaq up 8 points. The bond market is currently up 13/32, but we will likely still see an increase in mortgage rates of approximately .250 of a discount point compared to yesterday's morning r ates due to afternoon weakness in bonds.

There is no relevant economic news scheduled for release today, so look for the stock markets to again be the biggest influence on bond trading and mortgage rates. I would not be surprised to see further changes to rates later today. This has been quite a volatile week for the markets and mortgage rates, so who knows what traders will do to close out the week.

Next week brings us many economic reports and the first FOMC meeting of the year. This could influence trading this afternoon as market participants prepare for those releases. There are nine reports currently scheduled along with the FOMC meeting. That leads me to believe that we will see much more volatility in the markets next week.

The data starts Monday morning with the release of December's New Home Sales. This is the week's least important report and probably will not affect mortgage rates much. The important data starts Tuesday when we get to see December's Durable Goods Orders and January's Consumer Confidence Index.

The rest of the week brings us readings on employment costs for wages and benefits, personal income and spending, in addition to key readings on economic growth, employment sector and manufacturer sentiment. Look for more details on next week's data and event sin Sunday's weekly preview.

Friday's bond market has opened in negative territory following mixed economic news and early stock gains. After yesterday's steep sell-off that had the Dow close down over 300 points, stocks have rebounded during morning trading. The Dow is currently up 85 points while the Nasdaq has gained 20 points. The bond market is currently down 9/32, but we will still s ee an improvement in this morning's mortgage rates of approximately .250 of a discount point over yesterday's morning rates. The improvement is a result of strength in bonds late yesterday.

The first of today's two pieces of economic data was December's Leading Economic Indicators (LEI). It showed a decline of 0.2% that was a little larger drop than was expected. This is good news for bonds and mortgage rates because it indicates that the economy may continue to slow in the coming months. That eases inflation concerns and hurts stock prices, which makes bonds more attractive to investors.

The second report was January's preliminary reading to the University of Michigan Index of Consumer Sentiment that exceeded forecasts by a wide margin. Today's release revealed a reading of 80.5 compared to forecasts of a 74.5 reading. That means that surveyed consumers were much more optimistic about their own financial situations than many had thought. This is consider ed bad news for bonds because rising levels of confidence usually means that consumers are more apt to make large purchases in near future.

The bond market will close early today and remain closed Monday in observance of the Martin Luther King Holiday. They will reopen for normal hours Tuesday morning. I don't think the early close will particularly affect bond trading or mortgage rates today.

Next week is extremely light in terms of economic releases and events. It appears there is only a single housing related report on the calendar. Look for more details and expectations for next week in Sunday's weekly preview.

Thursday's bond market has opened in positive territory following the release comments by Fed Chairman Bernanke that indicated the economy is quickly weakening. The stock markets have reacted negatively to the news with the Dow down 115 points and the Nasdaq down 10 points. The bond market is currently up 18/32, which should improve this morning's mortgage rat es by approximately .250 of a discount point.

The Fed Beige Book that was released yesterday afternoon further supported theories that the economy is slowing. The report details economic conditions throughout the country by region. It showed that while the economy did expand from the middle of November through the end of the year, it was at a slower pace than the previous report showed from early fall. This is good news for mortgage rates because the slowing economy should ease inflation concerns.

Today's only relevant monthly economic release was December's Housing Starts. It showed a whopping drop of 14.2% in starts of new homes last month. This was much weaker than expected and dropped the number of new starts to their lowest level since May 1991. That indicates that the housing sector is still slowing very quickly.

Mr. Bernanke was speaking to the House Budget Committee when he addressed the need for temporary economic stimulus to prevent the e conomy from falling into a recession. He told legislators that they should enact the stimulus quickly, which analysts translated into concern that the economy may already be headed for a recession. This is short-term good news for bonds and mortgage rates because the slowing economy eases inflation concerns and makes long-term securities such as mortgage-related bonds more attractive investors.

December's Leading Economic Indicators (LEI) will be posted late tomorrow morning. This index attempts to measure economic activity over the next three to six months. It is considered to be of moderate importance to the bond and mortgage markets. Analysts are currently expecting to see a 0.1% decline, meaning that economic growth over the next few months will likely slow. A larger than expected rise would be good news for the bond market and mortgage rates, but a larger than expected rise could lead to bond selling and an increase to mortgage rates tomorrow morning.

T he final report of the week is January's preliminary reading to the University of Michigan Index of Consumer Sentiment. This index measures consumer willingness to spend and can have enough of an impact on the financial markets to change mortgage rates. If it shows a reading weaker than the 74.5 that is expected, the stock markets will probably drop and bond prices will rise. This could lead to mortgage rates moving lower tomorrow.

This week brings us the release of eight pieces of economic data to digest. There is no relevant data scheduled for release tomorrow, but two of the week's most important releases are coming Tuesday morning. December's Retail Sales data is the first. It measures consumer spending by tracking sales at retail establishments in the U.S. Since consumer spending mak es up two-thirds of the U.S. economy, any related data is watched closely. Current forecasts are calling for an increase in sales from November's levels of approximately 0.1%.

The second report of the day will be released by the Labor Department. They will post the Producer Price Index (PPI) at 8:30 AM, which helps us measure inflationary pressures at the producer level of the economy. Rapidly rising prices will raise inflation concerns and may lead to mortgage rates rising. If it reveals a decline, especially in the core data that excludes more volatile food and energy prices, the bond market should fair well. If we see weaker than expected readings, the bond market may rally and mortgage rates could move lower. Current expectations are calling for a 0.2% rise in the overall reading and a 0.2% increase in the core data.

There are three relevant reports on the agenda for Wednesday. The first is December's Consumer Price Index (CPI). This is also one of the mo st important monthly reports that we see since it measures inflationary pressures at the consumer level of the economy. It is very similar to Tuesday's Producer Price Index (PPI), but is considered to be of higher importance since it tracks consumer prices. The overall index is expected to rise 0.2% while the core data is also expected to increase 0.2%. Weaker than expected readings should lead to a bond rally and improve mortgage rates Wednesday.





December's Industrial Production report is the second report to be posted Wednesday. It will be released at 9:15 AM ET and measures output at U.S. factories, mines and utilities. This gives us a good indication of manufacturing sector strength or weakness. Current forecasts are calling for a decline of 0.1% from November's production. A larger than expected drop would be good news and should lead to lower mortgage rates Wednesday as long as the CPI doesn't reveal any surprises.

Wednesday afternoon, th e Fed Beige Book report will be posted, detailing economic activity regionally throughout the U.S. The Fed uses this data during their Federal Open Market Committee (FOMC) meetings when deciding whether or not to change key short-term interest rates. Accordingly, its results can cause a fair amount of movement in the bond market and mortgage rates. This could lead to an afternoon revision in mortgage pricing Wednesday.





December's Housing Starts report will be released early Thursday morning, but I don't see it causing much movement in mortgage rates. This report gives us an indication of housing sector strength and future mortgage credit demand, but it is the least important of this week's news.

December's Leading Economic Indicators (LEI) will be posted late Friday morning. This index attempts to measure economic activity over the next three to six months. It is considered to be of moderate importance to the bond and mortgage markets. Analysts are currently expecting to see a 0.1% decline, meaning that economic growth over the next few months will likely slow. A larger than expected rise would be good news for the bond market and mortgage rates, but a larger than expected rise could lead to bond selling and an increase to mortgage rates Friday morning.





The final report of the week is January's preliminary reading to the University of Michigan Index of Consumer Sentiment. This index measures consumer willingness to spend and can have enough of an impact on the financial markets to change mortgage rates. If it shows a reading weaker than the 74.5 that is expected, the stock markets will probably drop and bond prices will rise. This could lead to mortgage rates moving lower Friday.

Overall, Tuesday and Wednesday are the most important days of the week with the Retail Sales, PPI and CPI reports scheduled. If the CPI meets or is lower than forecasts, I expect to see mortgage rates clos e the week lower than tomorrow's opening levels. However, stronger than expected readings could lead to a spike in mortgage pricing.

Friday's bond market has opened in positive territory following early stock weakness. The stock markets are reacting to profit warnings and more credit concerns. The Dow has lost 146 points while the Nasdaq has fallen 30 points. The bond market is currently up 9/32, which will likely improve this morning's mortgage rates by approximately .125 of a discount po int.

November's Goods and Services Trade Balance report was released this morning. It showed a surprise jump in the U.S. trade deficit to bring it to $63.1 billion during November. This was much larger than was expected, but fortunately the mortgage market does not view this data as important and therefore has had little impact on mortgage rates.

Next week brings us the release of several very important pieces of economic data for the markets to digest. We will get key readings on consumer spending and inflationary pressures at different stages of the economy. We also have the Fed Beige Book on tap that will detail economic conditions by region, along with several other reports of less importance.

There is no relevant news scheduled for release Monday. However, two of the week's most important reports will come Tuesday. There is no doubt that we will see a much more active week in mortgage pricing than we saw this week. Look for more details on nex t week's events in this Sunday's weekly preview.

Thursday's bond market has opened flat with no important economic data being released to influence trading. The stock markets are also relatively calm with the Dow nearly unchanged and Nasdaq down 10 points. The bond market is currently down 1/32, which will likely keep this morning's mortgage rates at yesterday's levels.

The Labor Department said this morning that 322,000 new claims for unemployment benefits were filed last week. This somewhat negative news for bonds because it was a lower number than was expected. However, since this data only tracks a week's worth of claims, it usually has little impact on mortgage rates.

November's Goods and Services Trade Balance report will be posted early tomorrow. It is expected to show a $59.5 billion trade deficit. Since this report gives covers November it is not considered to be of high importance. This means it will likely not have much of an impact on mortgage rates either.

The lack of economic data on tap this week is easily made up for next week. There are quite a few pieces of economic news scheduled for release next week. Accordingly, I think the bond market will remain calm the rest of today and tomorrow ahead of next week's data.

Wednesday's bond market has opened in negative territory again following early stock gains. The Dow and Nasdaq are in positive territory with gains of 43 and 6 points respectively. The bond market is currently down 7/32, but due to strength yesterday we will likely see little change in this morning's mortgage pricing.

There is no relevant economic news s cheduled for release again today. The only monthly data comes Friday morning and it is not considered to be very important to the markets. The stock markets will likely continue to be the biggest influence on bond trading the next few days, but I am expecting to see mortgage rates remain fairly calm.

The first piece of news to watch will be Thursday when the Labor Department will post weekly unemployment statistics. Since this data tracks only a week's worth of claims it usually does not affect mortgage rates. However, since this week is so light in terms of economic news, the markets may react to its results a little more than usual. It is expected to show that 340,000 new claims for benefits were filed last week.

November's Goods and Services Trade Balance report will be posted early Friday. This report gives us the size of the U.S. trade deficit, but partly because it covers November it is not considered to be of high importance. This means it will likely not have much of an impact on mortgage rates either.

This week brings us the release of only one piece of monthly economic data. We will also get weekly unemployment claims, but it usually has little impact on bond trading and mortgage rates. Therefore, the stock markets could very well be a major influence eon bond trading and mortgage rates this week.

The first piece of news to watch will be Thursday wh en the Labor Department will post weekly unemployment statistics. Since this data tracks only a week's worth of claims it usually does not affect mortgage rates. However, since this week is so light in terms of economic news, the markets may react to its results a little more than usual.

November's Goods and Services Trade Balance report will be posted early Friday. This report gives us the size of the U.S. trade deficit, but partly because it covers November it is not considered to be of high importance. This means it will likely not have much of an impact on mortgage rates either.

Overall, with a lack of relevant of economic data scheduled to be posted, we will likely see a relatively calm week in mortgage rates, assuming the stock markets are not too volatile. If the stock markets rally, funds could shift from bonds to stocks, driving bond price slower and mortgage rates higher. If stocks are weak, mortgage rates should improve as investors bring funds into bonds as shelter from the volatility in stocks. The data that is scheduled for release this week is relatively minor, so there is a decent possibility of seeing mortgage rates remain fairly calm.