Thursday, July 13, 2017

What's going on and why does it matter? Global stock markets rallied yesterday, with the Dow closing at an all-time high.  Mortgage bonds also rallied in response to remarks by Fed Chair Janet Yellen that there is “considerable uncertainty” about inflation moving higher in the coming months.  If inflation doesn't move higher, the Fed may delay its plans to hike interest rates, and they may even extend their massive bond-buying program. This is good news for both bonds and stocks, hence yesterday's rally.  It will be interesting to see if the rally in mortgage bonds continues today because bond prices are hovering near their 100-day moving average, which has been operating as a strong level of technical resistance over the past two weeks.  Fed Chair Yellen is scheduled to testify again today, this time before the Senate Banking Committee. Her prepared remarks are identical to yesterday's remarks, but the market will be looking for any additional insights during the Q & A part of her testimony.  The Fed is scheduled to purchase a sizable $2.25 billion of 30-year and 15-year conventional mortgage bonds today, which may propel bond prices higher. What should you do about it? Watch for mortgage bonds to rebound off their 100-day moving average, but be prepared to lock your rate quickly if bonds fall back below that critical level.  Economic reports that may impact mortgage rates this week: Date Report Period Prior Estimate Actual Tue 11 Jul JOLTS Job Openings May 6.04M 5.95M 6.04M Tue 11 Jul Wholesale Inventory May -0.5% 0.3% 0.4% Tue 11 Jul Wholesale Sales May -0.4% 0.2% -0.5% Thu 13 Jul Initial Jobless Claims Week of July 3 250,000 245,000 247,000 Thu 13 Jul PPI June 0.0% 0.0% 0.1% Fri 14 Jul Core CPI June 0.1% 0.2% Fri 14 Jul Real Weekly Earnings June 0.3% 0.0% Fri 14 Jul Retail Sales June -0.3% 0.1% Fri 14 Jul Industrial Production June 0.0% 0.3% Fri 14 Jul Capacity Utilization June 76.6% 76.7% Fri 14 Jul Mfg. Output June -0.4% 0.2% Fri 14 Jul Business Inventories May -0.2% 0.3% Fri 14 Jul U of Mich. Consumer Sentiment July 94.5 95.0