Mortgage Headlines
Mortgage Rates March Up
Another sell-off in U.S. Treasury securities on Friday led to the biggest one-week decline in prices in more than two months. Bond traders relegated several friendly economic reports to the back burner and dwelled on signs of inflation and concerns over the issuance of additional government debt, which led to aggressive selling. In addition, the steady decline in oil prices weighed on Treasuries, as lower energy prices are not as likely to slow the economy as high prices were. When the markets closed, the yield on the benchmark 10-year note was up 14 basis points from a week ago, settling at 4.26 percent, while the yield on the long bond, which is most affected by inflation, climbed 17 basis points during the week. The spike in yields, which move in the opposite direction of prices, forced mortgage lenders who base their rates on yields to raise them on most mortgage products.
Treasuries opened the session, still stinging from Thursday's regional manufacturing indexes from Philadelphia and New York that showed the prices-paid components climbing from the 20s to the 50s. The increases clearly have inflationary overtones, as manufacturers hit with higher energy costs will eventually have to pass those costs onto the consumer. Inflation is the sworn enemy of Treasuries, as it erodes their value.
The only report released Friday showed consumer confidence nosedived in the first two weeks of September. Current conditions slid to 97.7 from 108.2, and future expectations fell to 63.9 from 76.9. The University of Michigan survey fell to 76.9 from 89.1 just two weeks ago. This should have been good news for Treasuries, but preoccupation with the Fed and what it will do and say on Tuesday trumped the index.
Stocks Close Week on a High Note
After what could only be termed a bad week, U.S. stock indexes rebounded on falling oil prices, some oversold stocks that were available at bargain prices, and September stock options expirations. In fact, some analysts credited expirations for today's positive closes. Volume was high and gains were significant, although not enough to reverse previous losses for the week. The homebuilder index slid after a few heady sessions, and the Philadelphia Semiconductor Index (SOX) closed negative in spite of an upgrade of Intel. Upgrades of Exxon and Intel set a positive tone early, but these were superseded by other moves during the session. McDonald's, with a 2.4 percent gain, benefited from an unsubstantiated report that Pershing Square Capital Management would purchase 4.9 percent of the company. The investors also own a large percentage of Wendy's. But American Express was the Dow's biggest gainer, adding 3.3 percent on the session. Fellow financial component JP Morgan rose 2.5 percent and Exxon (in spite of oil's slide to $63 a barrel) rose just shy of 2 percent. Hewlett-Packard and Honeywell gained 1.7 percent and 1.8 percent, respectively, while another eight Dow components rose more than 1 percent each.
Retailers Home Depot and Wal-Mart led the Dow in losses, dropping 1 percent each. Five others ended in the losing column, but declines were modest.
The Nasdaq posted a gain led by Adobe Systems and an upgrade of JDS Uniphase. Adobe, creator of graphics software, climbed 10 percent on higher earnings and revenues, while JDSU led the tech bellwethers with an 8.1 percent gain after an upgrade and an increased price target. Qualcomm, Sun Microsystems and Cisco Systems were each up more than 2 percent, while Intel eked past the 1 percent mark. Only three bellwethers closed negative, led by Yahoo!, which suffered a 1.1 percent loss.
At closing:
The Dow 30 Industrial Index rose 83.19 points (+0.79 percent) to 10,641.94; the Nasdaq Composite index added 14.20 points (+0.66 percent) to 2,160.35, and the benchmark Standard & Poor's 500 Index gained 10.18 points (+0.83 percent) to 1,237.91.
The 30-year Treasury bond fell 20/32 with the yield rising to 4.56 percent from 4.51 percent at Thursday's close.
The 10-year Treasury note was down 11/32 in price with the yield rising to 4.26 percent from 4.21 percent at Thursday 's close.
The 5-year Treasury note lost 8/32 in price with the yield climbing to 4.05 percent from 3.99 percent at Thursday 's close. At 4 p.m. EDT, AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:
The 30-year Conventional Fixed-Rate Mortgage was at 5.606 percent versus5.566 percent at Thursday 's close.
The 15-year Conventional Fixed-Rate Mortgage was at 5.195 percent from 5.141 percent at Thursday 's close.
Coming Up:
The week of September 19 has little to offer in the way of economic reports, but the Tuesday meeting of the Fed will more than make up for it. Although most insiders expect an eleventh straight 25-basis-point increase, there is no clear consensus about future moves. Will the Fed pause at the Nov. 1 meeting if October economic data point to slowing? Or, will they continue in their mission to ward off inflation? The financial markets are hoping for answers to these questions in the accompanying statement. Also due on Tuesday are Housing Starts and Building Permits for August.
Over the weekend and into Monday mortgage rates will likely continue their climb in order to keep pace with today's steep rise in Treasury yields.
Carolyn Siegel
carolyn@interest.com
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