Mortgage Headlines
Mortgage Rates Could Edge Up
Stronger-than-expected economic reports put pressure on U.S. Treasury securities on Friday. The indicators spurred a sell-off in bonds that sent the yield on the benchmark 10-year note well above 4.0 percent for the first time since June 21. Yields, which move in the opposite direction of prices, ticked down yesterday after the Fed assured the markets that 'long-term inflation remains well-contained.' But the surge in yields today is sure to put pressure on mortgage rates. The financial markets will be closed on Monday in observance of Independence Day.
Two reports grabbed the attention of bond traders - one on manufacturing and the other on consumer confidence. The ISM index of nationwide manufacturing conditions in June climbed to 53.8 from May's 51.4 reading. The strong number flew in the face of sentiment that manufacturing is slowing. Analysts expected the index to creep up to 51.5. Although the ISM has been above 50 for the last 25 months, this is the first increase in the index in 12 months. Any number above 50 indicates expansion in the sector. The various components within the report revealed employment and new orders are on the rise, while prices-paid declined sharply.
The University of Michigan's Consumer Sentiment survey for June hit 96, not only beating May's 86.9 outcome but also besting analysts' forecasts of 94.5. This survey, paired with Tuesday's bullish Consumer Confidence Report prepared by the Conference Board, bodes well for consumer spending and future economic growth. It is believed that a confident consumer will spend money. Construction Spending in May was the only bearish report of the session, but it was outweighed by good news. Spending on construction fell 0.9 percent when forecasters predicted a 0.5-percent increase - the same as in April.
Dow Rises on Data While Nasdaq Struggles
The Dow Jones Industrials rebounded on Friday from Thursday's 100-point loss, bolstered by strong manufacturing data and a surge in consumer confidence. The rally, however, was kept in check as investors deserted Wall Street to get an early jump on the extended holiday weekend. A 4-percent increase in oil prices, which surged to $58.75 a barrel, also kept a lid on buying. At 2:00 p.m. EDT the Dow was poised for a closing gain, with 22 of its 30 components in positive territory. GM led with a 1.4- percent increase due to a 41-percent increase June sales. Five other components also gained more than 1.0 percent.
The Nasdaq composite is having a tougher time. The tech-heavy index opened in positive territory, but after two hours-plus it has been bobbing in and out a negative territory. At 2:00 p.m. EDT the tech bellwethers had one big winner and one big loser, with the others waffling in between. Qualcomm led with a 3.0-percent increase, while Sun Microsystems brought up the rear with a 2.7-percent loss. An antitrust suit settlement that required Microsoft to pay IBM $775 million had little effect on either corporation. IBM posted a small gain while Microsoft held unchanged.
At 2:00 p.m. EDT:
The Dow 30 Industrial Index was up 39.21 points or 0.38 percent at 10,314.18; the Nasdaq Composite index was up 0.69 points or 0.03 percent at 2,057.65, and the benchmark Standard & Poor's 500 Index was up 3.87 points or 0.32 percent at 1,195.20.
The 30-year Treasury bond was down 1-30/32 in price with the yield rising to 4.30 percent versus a 4.19-percent closing on Thursday.
The 10-year Treasury note was down 1-2/32 in price with the yield rising to 4.04 percent versus a 3.92-percent closing on Thursday.
The 5-year Treasury note was down 19/32 in price with the yield rising to 3.82 percent, versus a 3.70-percent closing on Thursday.
At 2:00 p.m. EDT AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:
The 30-year Conventional Fixed-Rate Mortgage was at 5.362 percent from 5.382 percent at Thursday's close.
The 15-year Conventional Fixed-Rate Mortgage was at 4.959 percent from 4.97 percent at Thursday's close.
Coming Up
The week of July 4 will be shortened by the three-day holiday weekend so economic reports will be compressed. There is, however, little in the way of market-moving data until Friday when the Employment Report for June is released. Prior to that we get information on the service sector, first-time weekly unemployment claims for the week ended July 2, and May reports on Wholesale Trade Inventories and Factory Orders, which are due on Tuesday. Analysts are expecting factory orders to rise 3.0 percent, which would be a big jump from the April increase of 0.9 percent. Over the weekend and into Tuesday mortgage rates could edge up due to the big increases in Treasury yields realized on Friday.
Carolyn Siegel
carolyn@interest.com
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