Commentary: All the chatter surrounding the Administration's proposed $447 billion package of tax cuts and spending plans is little more than background noise for financial markets this morning. Capital market investors of every description will not commit capital in significant amounts unless they see creditable policy movement from Washington. Until then, all the speeches and posturing in the world will likely have only temporary influence on the direction of equity markets and mortgage interest rates.
One of the few things investors seem to be completely sure of at the moment is that this economic downturn has been deeper and lasted longer than anything history has recorded since 1930. The vast majority of market participants are also sure all of the Fed's monetary policy strategies together with the fiscal stimulus programs that have been provided by Washington up to this point have not been enough to rekindle the economic growth engines. Keep your fingers crossed that the coming round of "financial starter fluid" is enough to produce something more than just a sputter and cloud of smoke from the economy. My personally opinion is there is a growing list of reasons for optimism in this regard - guarded optimism certainly - but optimism nonetheless.
The central feature of the coming week will be a three-part Treasury debt auction scheduled to run from Tuesday through Thursday. Uncle Sam will look to borrow a total of $66 billion in the form of 3- and 10-year notes and 30-year bonds. The economic calendar will feature twin measures of inflation pressure in the form of Wednesday's August Producer Price Index and Thursday's August Consumer Price Index. Wednesday's August Retail Sales figures will also draw considerable investor attention. All three major economic reports are expected to be mortgage market neutral. The Treasury auction results together with trading action in the stock markets will probably exert the most influence on the trend trajectory of mortgage interest rates next week.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
