Mortgage Headlines
Mortgage Rates Hold at High Levels
A big sell-off in U.S. Treasury securities on Wednesday sent yields, which move in the opposite direction of prices, into territory not visited in several months. The yield on the benchmark 10-year note, which is used as a guide to set mortgage rates, hit 4.6 percent and mortgage rates, which usually move in sync with yields, remained at their highest levels since June 2004. The reason? Bond traders are concerned about further rate hikes from the Fed, which made its 12th straight increase on Tuesday. Not only did the overnight lending rate climb to 4 percent, but also in the accompanying statement there was no mention of an end to the increases. Once again the Fed stressed that accommodation can be removed at a 'measured' pace.
The Fed appears bent on fighting inflation with rate hikes, although it stated yesterday 'underlying inflation (is) expected to be contained.' Bond traders fear inflation as it erodes the value of fixed-rate assets such as bonds. But with no economic news released today to encourage buying in Treasuries and no end of credit tightening in sight, there was little incentive to buy and good reason to sell. Traders also are remaining cautious prior to Friday's release of the October Employment report.
Wall Street Goes Wild
A decline in oil prices and a tech rally sparked broad-based buying on Wall Street. Many shares are attractively priced in the wake of a poor showing in October that saw the Dow Jones Industrials lose 1.2 percent, the Nasdaq composite shed 1.5 percent and the S&P 500 drop 1.8 percent. Chips were strong today, sending the Philadelphia Semiconductor index (SOX) up 3 percent. Homebuilders came through with strong earnings, pushing the Dow Jones Home Construction index up 5.0 percent, and airlines also were flying high.
Intel, which suffered a big loss yesterday after Dell lowered its earnings forecast and raised fears of lowered demand for computers, led the Dow Jones on Wednesday with a 3.2 percent increase. Dow tech components Microsoft and Hewlett-Packard also posted hefty gains, as did AIG, American Express, Exxon and Du Pont. GM, which sold off yesterday after reporting a 23 percent drop in sales in October, led the Dow in losses today, falling 2.4 percent. It was the only component of the seven that closed negative to suffer a significant loss.
Intel was only one of the leaders in technology to post a big gain. Apple and Applied Micro Devices each added 4 percent and Qualcomm tacked on 2.3 percent. JDS Uniphase also contributed with a 6.78 percent gain. Some software companies were left out due to disappointing earnings provided by Sun Microsystems and Symantec.
At 4:00 p.m. EST:
The Dow 30 Industrial Index rose 65.96 points (+0.63 percent) to10,472.73; the Nasdaq Composite index closed up 30.26 points (+1.43 percent) to 2,144.31 and the benchmark Standard & Poor's 500 Index climbed 12.00points (+1.00 percent) to 1,214.76.
The 30-year Treasury bond was down 20/32 in price with the yield rising to 4.80 percent from 4.76 percent on Tuesday.
The 10-year Treasury note was down 10/32 in price with the yield climbing to4.60 percent from 4.57 percent on Tuesday.
The 5-year Treasury note was down 5/32 in price with the yield rising to4.49 percent from 4.46 percent on Tuesday.
At 2:00 p.m. EST, AVERAGE mortgage rates (zero discount points) based onrates collected nationwide were:
The 30-year Conventional Fixed-Rate Mortgage was at 6.039 percent from 6.03 percent on Tuesday.
The 15-year Conventional Fixed-Rate Mortgage was at 5.597 percent from 5.574 percent on Tuesday.
Coming Up:
Thursday features a number of economic reports including third-quarter Productivity and Costs, Factory Orders for September, first-time jobless claims for the week ended October 29 and the ISM report on service sector conditions for October.
Productivity could be important as the markets are looking at wages for signs of inflation and a unit labor cost index is contained within this report. Factory Orders are expected to fall 1 percent after rising 2.5 percent in August, while the ISM is forecast to climb to 57 from 53.3. First-time claims should hit 320,000, according to analysts, after coming in at 328,000 last week.
These reports are unlikely to impact Treasuries in any significant way, and caution about the jobs report could take center stage. This will likely mean that Treasury yields and therefore mortgage rates will remain high.
Carolyn Siegel
carolyn@interest.com
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