Dedham Condominiums

Prices on U.S. Treasury securities were little changed on Tuesday, with most yields, which move in the opposite direction of prices, closing near opening levels. The notable exception was the 30-year bond, which fell in price after facing volatility last week. The long bond does not influence mortgage rates, however, so lenders were able to hold rates close to those of last Friday.

The index of leading economic indicators, or LEI, took a big leap in January, rising 1.1 percent -- far stronger than the 0.1 percent posted in December. These data, although low on the list of influential reports, turned heads this morning, as the index made its biggest move in seven months. The LEI looks at 10 monthly reports and forecasts economic trends six months out. The sharp increase sparked fear that more rate hikes would be needed to control economic growth. The impact of this report was short-lived, however. Analysts were looking for a 0.6 percent increase.

Bond traders also anxiously awaited the release of the minutes from the Jan. 31 meeting of the Federal Open Market Committee, but it offered no surprises. Although the Fed believes that core inflation remains tame, there are concerns about rising inflationary pressures over the next few months. As was stated previously, future data on inflation will dictate the moves of the Fed. The Fed futures market anticipates a 25-basis-point increase in short-term interest rates at the March 28 meeting and is about 75 percent certain that a similar move will be made May 10.

Rising oil prices, tech shares weigh on stocks

Stocks opened in positive territory and stayed there as long as it took to release the LEI. Wall Street took a dim view of the possibility of strong economic growth, fearing it would bring inflation and rate hikes from the Fed. A two-day surge in oil prices -- due in part to problems with insurrection in the oil fields of Nigeria -- also has kept pressure on the three major indexes. On Tuesday, the price of oil rose $1.22 to $61.10 per barrel. And tech shares, which have been either darlings or devils, were largely responsible for today's Wall Street woes.

Semiconductors, which have struggled mightily of late, had no better luck today. Micron Technology, KLA-Tencor and Linear Technology helped send the Philadelphia semiconductor index down again. Also weighing on techs was Hewlett-Packard, which wowed the markets on Thursday, but gave back 4.6 percent today.

The Dow Jones industrials closed with only 10 components in positive territory and only United Technologies posted a big gain -- up 1.4 percent. On the other hand, some of the Dow stars of last week took big hits today -- most notably Honeywell, which fell 1.8 percent and Verizon, which was off 1.2 percent. Wal-Mart offered earnings guidance that was below estimates and paid for it, and GM lost another 2.3 percent on the day.

As of 4 p.m. EST:

The Dow Jones industrial index closed down 46.26 points (-0.42 percent) to 11,069.09; the Nasdaq composite lost 19.40 points (-0.85 percent) to 2,262.96, and the Standard & Poor's 500 Index fell 4.20 points (-0.33 percent) to 1,283.04.

The 30-year Treasury bond closed down 12/32 in price with the yield rising to 4.53 percent, from 4.5 percent on Friday.

The 10-year Treasury note closed flat in price with the yield holding 4.56 percent.

The five-year Treasury note closed up 1/32 price with the yield falling to 4.58 percent, from 4.59 percent on Friday.

The two-year Treasury note closed down 2/32 in price with the yield rising to 4.7 percent, from 4.66 percent on Friday.

At 4 p.m. EST, average mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year conventional fixed-rate mortgage was at 6.003 percent, down from 6.009 percent on Friday.

The 15-year conventional fixed-rate mortgage was at 5.589 percent, down from 5.593 percent on Friday.

Coming up:

There is only one economic indicator slated for release on Wednesday, but it can be a market mover. The release in question? The January consumer price index, or CPI, which checks for inflation at the retail level. Analysts are expecting the CPI to rise 0.5 percent, with the core rate, which excludes volatile food and energy prices, edging up 0.2 percent -- matching the December increase.

With the Fed stating that it would rely heavily upon economic data to determine its stance on rate hikes, any hints of increasing inflation would likely stir selling in U.S. Treasuries.

Today, however, the slim change in Treasury yields should allow mortgage lenders to hold rates steady overnight and into Wednesday morning.

Carolyn Siegel

Carolyn@interest.com

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