Mortgage Rates Hit Hard

Mortgage rates were hit hard today as they rose very quickly.  It was probably one of the worst days we have seen in a while – but with the results after all the dusts settled, we are still at very low levels in the past year.  In other words, we only lost as much ground as we did because of how much ground we have been gaining recently.  I know that I called this yesterday in my evening blog, but I did not anticipate this much of a retreat.  Today stocks bounced, crude oil crumbled and treasury and mortgage prices were hit.

This week Janet Yellen’s testimony to Congress added another layer of uncertainty when she essentially confirmed no rate increases in March. Questioned about the Fed having to follow other central banks with negative interest rates, she did not agree but did not sweep it off the table either, saying the Fed is looking into it.

There were only a couple of economic reports this week, coming today, as what we got reported showed consumers finally seeing what was happening in the US and global equity markets. Crude oil this week volatile but will end this week slightly lower. The US dollar lost ground this week against the dollar index, the yen and the euro currency.

Global economic outlooks continue to point to more slowing - here in the US our economy is weakening but compared to the rest of the world we are holding on well. Much of the reason the stock market is declining, and will continue to slip, corporate profits weaker and the outlook from corporations has been less than optimistic.

This week brought increased discussion about whether the US might be headed for recession.  It certainly looks that way based on the recent turmoil and much lower interest rates, and it certainly looks like this is a growing possibility. So far though I have not seen evidence of it in the reported data. It is early in the year. Japan is running head long into recession, Europe on its way, and Asian markets also sliding. Will it filter into the US? Job growth in January was healthy, and employers are having trouble filling vacancies. The economy is stressing, anything moving forward should be considered “educated” guesses. Recall last year, bulls running wild in the Street, it was up, up and away but at year’s end the key stock indexes were unchanged.

Monday markets will be closed for President’s day, and China after being closed all week will re-open on Monday. Regional Fed officials have their leashes off next week, numerous speeches that likely will muddy the water more. Inflation reads with PPI and CPI, Industrial production and factory use.

In summary, rate rose today, which is not unusual considering how fast they dropped.  Market pullbacks are to be expected, but the $20 question is how long it lasts, and how high rates go.  I can assume today's move is attributed somewhat to the extended weekend. Locking is always a good decision, but technicals and fundamentals are pointing towards lower rates. I am going to continue to cautiously float unless you are within 15 days of closing.