Started a little better early this morning,
the 10 yr at 7:30 up 3/32 at 3.39%; at 8:00 still up 3 clicks but by 8:30 some softness in very light trading, the 10 yr -3/32 and mortgages started -1/32. The early trade in the stock indexes pointed to another lower open; the DJIA at 8:30 -40. At 9:00 the 10 yr -2/32, mortgages -3/32 and the DJIA -49 points. At 9:30 when the NYSE opened for business the DJIA opened down 30 points, the 10 yr -4/32 and mortgages -2/32. (see below for 10:10 levels)
At 10:00 three economic releases; the most significant, the August ISM manufacturing data. The overall index was expected at 50.2, right on the key pivot (any read under 50 is contraction, over it expansion; as the index moves away from 50 the strength or weakness increases). The index hit at 52.9; the internal components were a lot better than thought, new orders at 64.9 from 55.3 in July, prices pd at 65.0 frm 55.0 and employment at 46.4 frm 45.6. The overall index and new orders now imply expansion although the employment segment is still negative but inching higher each month. The initial; reaction was as we
would expect, selling in the bond and mortgage markets and support in equities.
July construction spending, expected to be unchanged from June, was down 0.2%; what was the estimate late last week before analysts moved to unchanged forecasts.
Finally at 10:00 NAR reported pending home sales index; contracts signed but not closed, up 3.2%, the highest sales in 2 yrs. The estimates were for an increase of 2.0%. Pending home sales have risen for the past six months and brings the debate back to the housing recovery.
Each day now we move closer to the mother of all data, the employment report, where the rubber meets the road; the so-called consensus is blixum.com for job losses to be just 200K, but the range of guesses is very wide (-365K to -115K). The unemployment rate is expected at 9.6%,
up 0.2% frm July.
Earlier this morning at 7:45 the Goldman-Sachs weekly chain store sales was down 0.5% from the previous week. The report filters out the back to school stuff and indicates consumers are not spending. The data is related to the general merchandise portion of retail sales. It accounts for roughly 10% of total retail sales. At 8:55 the Johnson Redbook retail sales reported a decline of 4.1% yr/yr same-store sales pace for the Aug. 29 week, at the very top of recent trend but
still of course very weak. The report said the back-to-school season is still on as teenagers are waiting for school to begin before choosing apparel and accessories. Slice it anyway and the data continues to confirm sales are not increasing at the retail level.
This afternoon August auto and truck sales will be reported beginning at 12:00; sales will be up with the clunker stuff. Estimates of 690K cars sold under the clunker program.
PRICES @ 10:10 AM
10 yr note: 101.18 -10/32 3.44% 4 BP
5 yr note: 99.27 -2/32 2.41% 2 BP
2 Yr note: 100.01 unch 0.98% unch
30 yr bond: 104.09 -38/32 4.25% 7 BP
Libor Rates: 1 mo; 0.256%; 3 mo 0.334%; 6 mo 0.728%; 1 yr 1.296%
30 yr FNMA 4.5 Oct: 99.30 -6/32 (.18 bp) (unch frm 10:00 yesterday)
15 yr FNMA 4.0 Oct: 100.16 -3/32 (.09 bp) ( 3/32 (.09 bp) frm 10:00 yesterday)
30 yr GNMA 4.5 Oct: 100.10 -2/32 (.06 bp) ( 7/32 (.21 bp) frm 10:00 yesterday)
15 yr GNMA 4.0 Oct: 101.04 -3/32 (.09 bp) ( 4/32 (.12 bp) frm 10:00 yesterday)
Dollar/Yen: 93.13 0.22 yen
Dollar/Euro: $1.4323 -$0.0005
Gold Dec: $957.20 $3.70
Crude Oil Oct: $70.88 $0.92
Goldman-Sachs Commodity Index: 455.00 1.21
DJIA: 9504.60 8.32
NASDAQ: 2023.53 14.57
S&P 500: 1022.66 2.04
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