Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – October 16, 2009

Interest Rates Benefiting At The Expense Of Stocks

We Have Support

The 50-Day Moving average has acted as a huge layer of support, since August.  True to form, today, Mortgage-Backed Securities Bounced right off of that trend line and is patiently sitting right above it.

Stocks Now Down

With Bank of America reporting its 1st loss of the year, Stocks are taking the hit.  General Electric and IBM also reported less than attractive earnings.  With money pouring out of Stocks, generally, those investors find a safe haven in bonds, and therefore, Mortgage-Backed Securities.  The higher the bond value, the lower the yield.  The lower the yield, the lower the interest rate.

Conflicting Growth Figures

Industrial Production and Capacity Utilization were reported somewhat higher than expectations.  This pressure on the economy is good, however, bad for interest rates.  But don’t panic.  We’re still well below inflationary readings on these reports.

Consumer Sentiment is lower than expectations.  This is showing that consumers are more interested in saving and paying down debt, than spending.  Not so good for the economy, but good for interest rates.  The consumer thinks that unemployment has hit its bottom.  I’m not so sure.  I don’t think our struggle is over yet.  We’ll have to wait and see…

Locking In…

Well, I’d float today.  We have the support of the 50-Day Moving Average and Stocks aren’t liking the 3rd Quarter Earnings Reports that keep coming out…so we’ll watch these levels, carefully!

You Say It’s Your Birthday…

Tomorrow’s my birthday.  I will have lived forty-two years on this planet, and I must say, they’ve been good to me.  I am spending the weekend with my family and some close friends.  I hope your weekend is as enjoyable as I expect mine to be.  As Brian Phelps says (Mark & Brian), “Be good humans!”  Until next week…

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Chico, CA Interest Rates Market Report – Economic Influences – May 21st, 2007

Interest Rates Going Up

Sometimes I can be wrong

Slapped in the face, is nothing compared to how I feel after last week. 

A good old fashioned kidney punch is a better metaphor to explain what happened with interest rates over the past seven days.  It’s hard to look like an expert all bellied over, gagging for breath.  First, let’s remember the Fed’s comments on inflationary concerns.  That was really the tip of the iceberg when things started moving in the wrong direction.  It certainly made the picture stronger for investing in stocks, as opposed to bonds.  And the stock market reacted fittingly.  Those comments basically stated that the Fed was still concerned with inflation, concerned that it would, “fail to moderate as expected.” 

Last week’s Consumer Price Index Report

was right in line with where one might hope.  0.2%, lowering the year-over-year core rate to 2.3%.  Better than expected!  However, with the initial concerns and tone of that Fed meeting, we broke below the 200-day moving average, which has worked as a tough buffer between higher and lower interest rates.  Remember that trend lines like the 25, 40, 50, 100, and 200 day moving averages are generally very difficult to move through.  And last week, we did so!  

Wednesday, Industrial Production and Capacity Utilization Reports were released.  Both were hotter than expected, causing us to see that companies may be producing goods and services at a maximum capacity.  This could cause them to increase prices, so another hint of inflation, perhaps not in control, caused bonds to move down slightly.  Thursday reported initial jobless claims at 293,000…the lowest level since January.  And the four-week jobless claim average was at their lowest level in a year.  These numbers are of concern to a tightening labor market.  A tightening labor market means higher paid employees, higher paid employees means higher consumer spending.  Higher consumer spending means higher inflationary concerns.  Higher inflationary concerns means higher interest rates…so if we do not start seeing a reversal of these reporting numbers, there is concern that the next level of support is 44 basis points below this weeks levels.  Which calculates to about a .375% to 0.5% cost in originations fees on a loan amount.  

Not much economic information to report for next week.  With stocks as hot as they are, and money moving out of bonds to get hitched up with the fast paced stock market, it would be difficult for bonds to make much of a move.  What could happen is a reversal of the stock market causing a “safe haven” for a move back into bonds.  However, it’s less likely to happen for a while.  If interest rates are going to start lowering significantly we’ll have to see these economic reports starting to show a calming of inflationary concerns.  Boy, how quickly the markets can change.  Until next week…