Bond and Mortgage Market

Globalhomefinance.com find the help and experience you need and get a friendly informed loan officer to make the experience stress and worry free. A nice start today in the bond and mortgage markets with US stock indexes trading lower and Europe’s stock markets weaker. At 8:30 more support for the bond market when March retail sales were much softer than forecasts; sales were expected to be about unchanged from Feb but fell 0.4% and when auto sales are extracted sales still down 0.4%. Sales fell by the most in nine months as employment slowed, showing households ended the first quarter on softer footing. Feb sales originally reported up 1.1% was revised to +1.0%. The weak sales in March add additional concern that the spending cuts and the increase in payroll taxes this year are having more of a negative impact on the economy than economists had forecast. The 8:30 report pushed stock index futures lower and increased the price gains on mortgage prices. Also at 8:30 March producer price index was expected -0.2%, as reported PPI declined 0.6% and when food and energy components were excluded PPI increased 0.2% as expected. Yr/yr PPI +1.1%, ex food and energy yr/yr up 1.7%. Inflation is not a factor these days, well below the levels that would concern the markets or the Fed. The 0.6% drop in the producer price index was the biggest since May and followed a 0.7% gain in the prior month. The cost of energy slumped by the most in three years according to data frm he Labor Dept. At 9:30 the DJIA opened -42, NASDAQ -10, S&P -5. The 10 yr note at 9:30 at 1.74% -5 bp with 30 yr MBS prices +22 bps. At 9:55 the mid-month U. of Michigan consumer sentiment index was expected at 79.0 frm 78.6 at the end of March. The index plunged to 72.3 the lowest index reading since Dec 2011. One more measurement that confirms that consumers are not as euphoric about their economic lives as the equity markets are about their pocketbooks. Once again a weak report didn’t faze the stock market; the three key indexes lower but no noticeable reaction to the decline in sentiment. The final data point this morning, at 10:00 Feb business inventories were expected to have increased 0.4% after increasing 1.0% in January. Inventories increased just 0.1% and Jan revised down to +0.9%. The inventory miss will take away some frm Q1 GDP when it is reported on the 26th. Fed chief Bernanke is on the calendar to speak at 12:30 at a community development conference in Washington. Always important when the Fed head talks, these days even more so with the question about the ending of the QEs hanging out there in the wind. There is no direct reason he will have anything to say, but in the Q&A anything is likely to come up, markets are not concerned with it though. The data this morning is constructive toward the view that the Fed will continue its easing policy for longer than some may have thought yesterday. The economy is clearly not expanding as rapidly as most thought at the beginning of this year. Unless there is a marked reversal in the speed of growth the Fed will not stop now after three years of support with easy monetary policy. Recently released data on employment and now confirmed weakness in retail sales should be lessening the bullish outlook for growth. March saw just 88K new jobs as businesses face uncertainty over the sequester cuts in spending and the realization that health care costs will increase as ObamaCare begin to be implemented. Whether there is anything these days that will set a decline in equity markets is questionable; so far nothing has fazed investors as stock prices continue to climb. Corporate profits are holding well for the most part, driving the market higher and higher in one of the strongest and long-running stock market rally in years. Businesses are getting more from present employees and refrain from hiring, the result is consumers are still being pressured and reluctant to increase spending. What will it take to set off a strong correctional rally in the equity market? So far with the Fed continuing to force investors into stocks, and the global view that the US is the best place to invest are countering the reality that consumers are not spending much and employment not improving much.