Mortgage Headlines
Mortgage Rates Soft Despite Firm Treasury Yields
A sharp pullback in energy prices coupled with unexpected strength in service-sector jobs tugged Treasury yields slightly higher on Tuesday, although rates for key mortgage products stayed stable to soft after the holiday weekend.
The post-holiday trading session saw Treasury yields, which move opposite of prices, uptick while U.S. stocks rallied on relief that crude oil and gasoline prices finally toppled from their lofty levels.
The slide in crude oil futures, which at one point on Tuesday saw the nearby contract lop more than $2 a barrel off last week's peak, also slashed gasoline, heating oil and natural gas prices as well.
News that a number of U.S. refineries that were shut down by Hurricane Katrina had resumed at least partial operations, plus announcement that the International Energy Agency will release 2 million barrels per day of oil over the next 30 days, slapped oil and its products sharply lower.
Crude Oil Slides
U.S. crude oil futures ended off $1.61 at $65.96 a barrel on Tuesday, and gasoline fell 12.87 cents, or 5.9 percent, to close at $2.055 a gallon.
Speculation that the U.S. economy might weather the effects of record-high energy prices more solidly than some traders had thought, coupled with a rise in service-sector economy, weighed on the bond market and simultaneously hoisted U.S. stocks higher.
Bond traders have figured recently that high energy prices would provide a proxy for Federal Reserve rate hikes and likely pre-empt the need for further credit tightening into yearend.
Key stock market gauges staged rallies of more than 1.0 percent apiece, boosted by lower oil prices that sparked a broad-based market advance. Equities gained more upside momentum when the Institute for Supply Management's non-manufacturing index rose to 65.0 in August from July's 60.5. Analysts had expected a reading of 60.0 in July. A reading above 50 indicates expansion in the sector. The August index was compiled before Hurricane Katrina hit the Gulf.
Anticipation of Intel Corp.'s quarterly update, expected on Thursday, lifted technology issues as well. Intel shares rose $0.42 (+1.66 percent) to $25.70. Similarly, Texas Instruments gained $0.67 (+2.06 percent) a share to $33.17 as the market waits for its guidance this week.
Some analysts, however, kept watch for upcoming guidance or earnings from retailers that likely have been hard-hit by the runup in oil and gasoline prices. They also fretted about the historically poor performance of the Dow 30 Industrial, Nasdaq Composite and the Standard & Poor's 500 indexes during the month of September.
At closing:
The Dow 30 Industrial Index rallied 141.87 (+1.36 percent) to 10,589.24; the Nasdaq Composite index advanced 25.19 points (+1.20 percent) to 2,166.86, and the benchmark Standard & Poor's 500 Index added 15.37 points (+1.26 percent) to 1,233.39.
The 30-year Treasury bond fell 1-1/32 with the yield rising to 4.35 percent from 4.30 percent at Friday's close.
The 10-year Treasury note was down 11/32 in price with the yield firming to 4.08 percent from 4.03 percent Friday's close.
The 5-year Treasury note was 6/32 in price with the yield rising to 3.89 percent from 3.83 percent at Friday'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 5.504 percent versus 5.526 at Friday's close.
The 15-year Conventional Fixed-Rate Mortgage was at 5.102 percent versus 5.109 percent at Friday's close.
Coming Up:
On Wednesday, second-quarter revised U.S. productivity is expected to show 2.2-percent annual rate, unchanged from the previous estimate.
Also on Wednesday, the Federal Reserve will release its Beige Book summarizing economic activity during July and early August, which probably will not cover the effect from Hurricane Katrina. The last Beige Book was released July 27 and summarized activity on or before July 18, so there's roughly a nine- or 10-day lag between the report's release and the cutoff date for its reporting period.
Given the firmning in Treasury yields on Tuesday, lenders may find room into Wednesday to nudge rates slightly higher on some mortgage products.
Laura Jacobs
ljacobs@interest.com
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