Mortgage Market News for the week ending February 2, 2007
#1
02-03-2007, 12:11 PM
Mortgage Market News for the week ending February 2, 2007
Fed Holds Rates Steady
Last week held an abundance of major economic data and a Fed meeting. What emerged was a picture of a “Goldilocks” economy, in which economic growth is strong but inflation is not expected to rise. Wednesday, the Fed appeared to reinforce this view, holding interest rates steady for the fifth consecutive meeting, as widely expected. Its accompanying statement suggested healthy economic growth ahead without much added risk of higher inflation, and mortgage investors responded positively to the Fed’s soothing comments about inflation. The statement described a "somewhat firmer" outlook for economic growth, and a housing market showing “tentative” signs of stabilization. Once again, future action will depend on incoming information.
Mixed results in Friday’s monthly Employment data were consistent with the emerging economic outlook. Against a consensus forecast of 150K, the economy added just 111K new jobs in January, but revisions to the data from prior months boosted the totals higher by 81K. The Unemployment Rate, expected to remain flat at 4.5%, rose to 4.6%. Average Hourly Earnings, a measure of wages, also came in lower than expected, representing an easing of inflation pressures from this source. Overall, the shortfall in the January Employment data and the good news on wage inflation made the report slightly positive for mortgage markets.
Wednesday’s Gross Domestic Product (GDP) report also combined strong economic growth with steady inflation. Fourth Quarter 2006 GDP showed growth at a 3.5% rate, above the consensus forecast of 3.0%, while the core inflation indicator came in a little lower than the estimates. GDP is the broadest measure of economic activity, and the level of growth surpassed expectations almost across the board. Separately, more signs of a rebounding housing market appeared, as evident from last week’s strong gains in the January Pending Home Sales index.
[ul]Also Notable: [*]The Fed held interest rates steady for the fifth consecutive meeting, as widely expected[*]The Unemployment Rate, expected to remain flat at 4.5%, rose to 4.6% in January[*]In 2006, Gross Domestic Product grew at a 3.4% rate, above the 20-year average of 3.1%[*]The January Pending Home Sales index jumped 5%, far exceeding the forecasts[/ul]
Average 30 yr fixed rate:
Last week:
+0.17%
This week:
-0.05%
Stocks (weekly):
Dow:
12,644
+170
NASDAQ:
2,472
+35
Week Ahead
The quirks of the Economic Calendar left next week with very little economic data. The only notable report will be Wednesday’s Productivity data. ISM Services on Monday and Jobless Claims on Thursday will also be released. Otherwise, Treasury auctions on Tuesday and Wednesday will attract the attention of investors. Finally, Fed speakers may provide a dose of excitement during a quiet week.
Last week held an abundance of major economic data and a Fed meeting. What emerged was a picture of a “Goldilocks” economy, in which economic growth is strong but inflation is not expected to rise. Wednesday, the Fed appeared to reinforce this view, holding interest rates steady for the fifth consecutive meeting, as widely expected. Its accompanying statement suggested healthy economic growth ahead without much added risk of higher inflation, and mortgage investors responded positively to the Fed’s soothing comments about inflation. The statement described a "somewhat firmer" outlook for economic growth, and a housing market showing “tentative” signs of stabilization. Once again, future action will depend on incoming information.
Mixed results in Friday’s monthly Employment data were consistent with the emerging economic outlook. Against a consensus forecast of 150K, the economy added just 111K new jobs in January, but revisions to the data from prior months boosted the totals higher by 81K. The Unemployment Rate, expected to remain flat at 4.5%, rose to 4.6%. Average Hourly Earnings, a measure of wages, also came in lower than expected, representing an easing of inflation pressures from this source. Overall, the shortfall in the January Employment data and the good news on wage inflation made the report slightly positive for mortgage markets.
Wednesday’s Gross Domestic Product (GDP) report also combined strong economic growth with steady inflation. Fourth Quarter 2006 GDP showed growth at a 3.5% rate, above the consensus forecast of 3.0%, while the core inflation indicator came in a little lower than the estimates. GDP is the broadest measure of economic activity, and the level of growth surpassed expectations almost across the board. Separately, more signs of a rebounding housing market appeared, as evident from last week’s strong gains in the January Pending Home Sales index.
[ul]Also Notable: [*]The Fed held interest rates steady for the fifth consecutive meeting, as widely expected[*]The Unemployment Rate, expected to remain flat at 4.5%, rose to 4.6% in January[*]In 2006, Gross Domestic Product grew at a 3.4% rate, above the 20-year average of 3.1%[*]The January Pending Home Sales index jumped 5%, far exceeding the forecasts[/ul]
Average 30 yr fixed rate:
Last week:
+0.17%
This week:
-0.05%
Stocks (weekly):
Dow:
12,644
+170
NASDAQ:
2,472
+35
Week Ahead
The quirks of the Economic Calendar left next week with very little economic data. The only notable report will be Wednesday’s Productivity data. ISM Services on Monday and Jobless Claims on Thursday will also be released. Otherwise, Treasury auctions on Tuesday and Wednesday will attract the attention of investors. Finally, Fed speakers may provide a dose of excitement during a quiet week.
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