Weekly Mortgage Overview: 2/4/2013

By February 4, 2013Mortgage Overview

This week, interest rates are still increasing, the 10 year note closed above 2.00% last Friday and MBS prices fell on stronger job growth. Although non-farm jobs were less in January than was thought, the revisions in November and December were stronger than reported. The DJIA closed slightly above the psychological 14K level; the issue on Monday and through this week is whether stocks can continue to increase. Last week there were a number of key economic releases; this week not much. Construction spending is increasing, the housing market showing increasing strength, consumer sentiment better, and manufacturing progressing. At the moment there is little coming out of Washington, but it’s coming when debates start on spending cuts that are set to automatically kick in on the 1st of March.

 We still believe the stock and bond markets are likely to retrace some of the recent moves. Both markets are ripe for corrections; however, that has been the case for a couple of weeks and yet the underlying strength of both have trumped what should be a normal retracement after the moves in the last couple of weeks. That said, when the markets do reverse it won’t be much and won’t change the longer outlook for interest rates or equity markets. The global economic outlook has improved recently with data out of China indicating that economy is shrugging off recent malaise; in Europe Germany is improving as are a couple of other countries in the region. Here in the US, although the IMF has lowered growth and Q4 GDP was weak, investors’ outlook has gained momentum as fixed income investments are being abandoned rapidly.