Mortgage Market Showing Little Movement After Yesterday's Move

The stock market opened a little weaker early this morning, while the bond and mortgage markets started off slightly better.  February producer price index came in better than anticipated which is negative for our pricing in the mortgage markets.  The PPI data added some additional selling in the stock market and pushed the 10yr yield down from 2.62% to 2.60%, MBS prices at 8:45 up 8 bps from yesterday’s close.

Earlier, the National Federation of Independent Business (NFIB) released the Fed small business optimism index came in better than anticipated, but was still lower than the number we got from January data.  The small decrease was in line with expectations and the fact of the index remaining above 105 for three consecutive months indicates the continuation of a very high level of optimism for small business owners.

A little bit ago, the FOMC meeting has started and we will now wait till 1:00PM tomorrow to see what they tell us the future holds after they announce the rate increase in the Fed rate. I do not know of anyone who is stating that there will be no rate increase, as it is all but already priced into the market.

Increasingly hearing and reading more and more from a multitude of sources questioning the level of US and global equity markets. The Trump victory lit a new fire under investors now betting heavily that a business man instead of a politician will lift all boats and drive economic growth higher. Corporate earnings have met and exceed most forecasts and unemployment continues to decline. According to ADP Jan and February job growth have exceeded 550K new jobs. At the same time there remains a huge concern over economic policies here and globally. What about consumers? They are not spending at levels that can sustain the anticipated growth.  We will more likely see this when the data comes out tomorrow morning regarding February Retail sales.  The concern is the low level of market volatility - investors simply do not seem to have anything to worry about and that usually does not end well for buyers that jump in at a top, even a momentary turndown. Why should we care? If stocks do roll over it will be a support for the bond and mortgage markets.

Crude oil is continuing lower this morning on news that Saudi Arabia is going to increase output. The OPEC agreement last fall is starting to crack. A number of people thought this would happen, but has been surprised that this has lasted this long.  Crude this morning down under $48.00. OPEC data showed Saudi Arabia reversed one third of the production cuts.

Continue to lock loans within the next 45 days, as the volatility right now is too much to anticipate any positive reduction in rates.