How I See The Market

Wednesday's bond market has opened in negative ground with no relevant economic news scheduled for release and the stock markets showing early gains. The Dow is currently up 113 points while the Nasdaq has gained 25 points. The bond market is currently down 6/32, but I believe we will still see a slight improvement in this morning's mortgage rates due to strength late yesterday.

The stock markets opened strong yesterday also, but actually fell into negative ground during the day before closing with respectable gains. If the major stock indexes repeat that cycle, particularly closing well below current levels, we may see improvements in bonds this afternoon. Since it is an especially light week with no relevant data being posted today, this could lead to a downward revision to mortgage rates this afternoon.

However, the flip side of that scenario is if stocks extend this morning's gains rather than retreat from their current levels. If the major stock indexes move higher, bonds could move lower later today. This would likely lead to an upward revision to mortgage rates this afternoon, but would probably be a minor adjustment.

The Labor Department will post weekly unemployment figures early tomorrow morning. This release usually has little influence on bond trading or mortgage rates, but with a lack of important data scheduled for release this week it may draw more attention than usual. Analysts are expecting to see that approximately 460,000 new claims for benefits were filed last week. The higher the total of new claims, the better the news for bonds and mortgage rates.

As an aside, I am really concerned about a Bear Market arriving soon.  Why?  We have seen a 17% drop in the S&P since April.  Anytime in the past that the S&P has fallen 20% or more, a Bear Market arrives.  When I look at the world stage: Europe headed into recession, Greece's stress test being 3 times minimum requirements, Germany wrestling with bailing out one country after another, the potential for the Euro to fall to parity within 24 months, China and Japan holding 1.5 Trillion in US debt, corporations setting on more than a Trillion dollars in cash and "not willling to spend it" because of Administration policies, I see only a desperate scenario ahead for the U.S. economy and its citizens. 

So, If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opin ion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.