Mortgage Rates Not Moving Much Again Today

Mortgage rates are moving sideways so far today, as we continue to see the tight range of what has become the normal unless something drastic changes the tune. Yesterday, the DJIA closed over 22K, leading to media mania; nice that it did and that stocks are moving higher in the face of slow growth, but it was just three stocks that had the momentum to push the index over the psychological level--and there are just 30 stocks included in the index.

Initial Weekly Jobless Claims hit 240K vs est of 242K. The more closely watched 4-week moving average dropped to 241,750. The July ISM Non-Manufacturing report (2/3 of our economy) showed a nice expansionary pace of 53.9. Any reading above 50.0 is positive. However, the markets were expecting a much stronger pace of growth in the 57.0 range, so this was a disappointment. Factory Orders were higher than expected in June (3.0% vs est of 2.9%) and May was revised upward significantly from -0.8% to -0.3%.

There is a Trade War looming. President Trump is set to sign a memo on Friday that will address huge trade violations by China on intellectual property. China has vowed to retaliate in kind on soy and other imports from the U.S.

Not news, but tomorrow the July employment data. MBS prices have been edging lower and the 10yr note rate has come down the last few sessions. Stocks running higher and the dollar still under pressure. The amalgamation of these ingredients is counter to what would be the normal reactions in rate markets. This suggests, at least to me, that investors foreign and domestic are hedging their bets in the equity market and that markets continue to believe inflation is not going to increase soon as Janet Yellen and Fed officials continue to expect. The volatility in the bond market recently has been low, similar to volatility levels in equity markets. Complacency.

Still doing OK, but the 10yr has a major hurdle at 2.23%, where it fell to before running back to 2.32%. Bullish talk continues for the stock indexes. The current situation has something for both bulls and bears, and both views do merit thinking. The best way to deal with it is to keep focused on market movements and not the people talking up their positions. Most money managers, hedge funds, and Wall Street firms are solidly in the bullish camp on stocks and the economy now.  I do not take that lightly but also, I equally do not take lightly that interest rates continue to move lower - slowly, but lower.