Mortgage Rates Retracting a Bit

Choppy today in the mortgage and treasury markets, the stock indexes had a good day. The consolidation, retracement, correction - whatever you want to call it, is underway in the bond market and will keep the mortgage markets from improving for a few more days. The geo-political tensions that led the decline in rates (Syria, North Korea, the MOAB bomb in Afghanistan) has eased over the last few days lessening the demand to move into safe arms of US treasuries.

This morning the April Philly Fed business index was weaker than expected on the headline – as this follows last Monday the Empire State manufacturing index which also slipped lower.  Markets generally took note but were not phased with the weakness - those two indexes are volatile from month to month. At one point today, the DJIA was up 225 points.

The trump administration finally found out where the carrier group Carl Vinson was - after saying the “armada” was headed to the Korean Peninsula Trump was informed that it was going the other way doing exercises with the Brits. Interesting….

Big debate going on now, as I noted last week that we put little confidence in those sentiment indexes that continue to improve (U. of Michigan and consumer confidence from the Conference Board). They were not being reflected in retail sales, housing, or any of what now is being called “hard” data versus “soft data”. Soft data has been a feel-good Trump view based on lower taxes, less regulation, fiscal spending, more jobs as America pushes back against goods being imported and not built hear. It is key to avoid those surveys until they are reflected by action and not dreaming. So far, this year it has been mostly hype with little economic improvements.  Last month manufacturing activity dropped for the first time in seven months, along with housing starts. Retail spending fell in March, the second month of decline, while consumer prices unexpectedly slid. Corporate investment has remained flat. Markets ignoring the data, betting more on the idea that with those soft sentiment and confidence indexes increasing is a leading indicator of future growth.

The Harris poll is sticking its neck out again on French elections - not saying they are wrong, just that they and most other pollsters were wrong on Trump and on Brexit. The latest Harris poll shows Emmanuel Macron beating Le Pen in a hypothetical runoff on May 7th, 67-33; Melenchon would beat her 61/39; Fillon would be Le Pen 59/41; The first-round poll on Sunday has Macron at 24.5%, followed by Le Pen (21%), Fillon (20%), and Melenchon (19%).

Tomorrow another key data point to end the week with March existing home sales. With the demand easing for treasuries the last few days, the timing to lock longer might come into play.