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The Day Ahead: Several Potential Market Movers; Focal Point is Retail Sales

The Day Ahead: Several Potential Market Movers; Focal Point is Retail Sales

Yesterday

– Extremely light volume; Data mattered very little

– Most trading surrounded the Fed’s daily buying operation

– Pending Home Sales were negative year/year, 1st time in 29 months

– Factoring out homebuyer tax credit, Pending Sales were much much worse

Today

– Expecting a bit more activity due to more robust data offerings

– Focal points on Retail Sales (830am) and Consumer Confidence (10am)

– 5yr Treasury Auction is a supporting actor, but no star

– Bond Markets look “ready to rally” if given a reason

Strategy

From the standpoint of trading levels, yesterday was meaningless.  Both Treasuries and MBS remained inside the ranges set by Friday’s highs and lows.  Data had limited effect and the biggest volume was seen surrounding the Fed’s scheduled Treasury buying operation.  That’s a clear-cut indication of day that may as well not have happened.  Pending Home Sales at least made it worth tuning in (more on that in the “charts” section below).

Today should make up for yesterday’s boredom.  At the very least, it stands a better chance.  Retail Sales is the focal point of the day from a data standpoint with Consumer Confidence helping round out the morning.  As has been the case for several years now, Producer Prices are essentially worthless when it comes to suggesting interest rate directionality.  At this point, it’s going to take a concerted effort across several inflation metrics before anyone cares.  That said, a lot of old dogs still care due to force of habit, but that doesn’t mean they should or you should.   So focus on Retail Sales at 8:30am.

If the beat or miss is big enough at 8:30, that may well set the tone for the day.  Consumer Confidence is notable in that it’s an October report, whereas the others are September (except Case Shiller which is August).  This either means it will matter more or that it will be disregarded as overly distorted by the shutdown.

The 5yr Auction at 1pm can provide a moderate course correction in the afternoon hours but isn’t the same sort of market mover as the morning data.

 

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Home Prices Rise for 19th Straight Month; Pace Decelerating

Home prices posted a 19th consecutive monthly gain in August the Federal Housing Finance Agency (FHFA) said on Wednesday.  FHFA’s purchase only Home Price Index (HPI) rose 0.3 percent on a seasonally adjusted basis from July but the 1.0 percent increase previously reported for July was revised down to 0.8 percent.

On a year-over-year basis the August index was up 8.5 percent.  Prices have now returned to the April 2005 index level but remain 9.4 percent below the home price peak attained in April 2007.

The index increased in seven of the nine U.S. Census Divisions in August with the South Atlantic and East North Central divisions experiencing declines.  The South Atlantic region, which encompasses all coastal states from Delaware to Florida plus West Virginia, was down 0.5 percent and the East North Central (Michigan, Wisconsin, Illinois, Indiana, and Ohio) division saw prices go down 0.3 percent.

The largest month-over-month increases were in the Mountain (Utah, Montana, Colorado, Nevada, Arizona, New Mexico, Idaho) and West North Central (Minnesota, both Dakotas, Nebraska, Iowa, Kansas, Missouri) divisions which rose 1.3 percent and 1.2 percent respectively.

The August 2012 to August 2013 changes were largest in the Pacific Region (California, Oregon, Washington, Hawaii, and Alaska) where prices appreciated 18.2 percent and the Mountain division with a 13.8 gain.  The smallest annual increase was in the Middle Atlantic division which consists of New York, New Jersey, and Pennsylvania and where prices were up 4.0 percent.

The FHFA index is calculated using home sales price information from mortgages sold to or guaranteed by the government sponsored enterprises Fannie Mae and Freddie May.

 

Article by Jann Swanson http://www.mortgagenewsdaily.com/10232013_fhfa_hpi.asp

For more information please visit http://www.mortgagessiny.com