Daily Commentary by Larry Baer: The holiday retail season began with a bang and ended with a whimper. U.S. retail sales rose at the weakest pace in seven months in December. Total retail sales increased 0.1% after rising by an upwardly revised 0.4% in November. The upward revision for November strongly suggests consumers frontloaded their holiday spending before sharply curtailing expenditures at the end of the year - even in face of heavy price discounting by retailers. Excluding autos, retail sales fell 0.2%, the first decline in this measure since May 2010.
In a separate report, the Labor Department said initial claims for government unemployment benefits surged by 24,000 during the first week of 2012. Claims usually rise to their highest level of the year, on an unadjusted basis, in the first or second week of January due to seasonal adjustments in manpower by business like transport and mail-delivery companies. Many manufacturers shutdown during the last two weeks of the year and those employees are eligible to file for benefits as well. The usefulness of this data in gauging labor market conditions will be diminished for another week or two until the "holiday effect" washes out of the report.
Mortgage investors had generally anticipated a "soft" December retail sales report and found nothing particularly surprising in the government's official numbers released earlier this morning. The weekly jobless claims data drew nothing more than a disinterested yawn.
News that Spanish and Italian government debt sales went much better than expected muted today's otherwise mortgage interest rate friendly economic news here at home. Some credit market participants are concerned some of the European "flight-to-quality" buying of dollar denominated assets may fade a little as Uncle Sam looks to peddle $13 billion of 30-year bonds at auction later this afternoon. I don't think there is much to worry about here - but give this event at least a passing glance. The auction will conclude at 1:00 p.m. ET and I will post the result on my website as soon as possible thereafter. Solid demand for this offering will tend to be supportive of steady mortgage interest rates while a poorly bid auction will probably cause mortgage investors to issue a re-price for the worst before the day is over.
FYI: According to the Mortgage Bankers of America overall mortgage loan demand rose 4.5% during the week ended Friday, January 6th. Mortgage loan demand fell 2.1% over the past four weeks but finished up 37.4% from year ago levels. Purchase money loan demand was up 8.1% from a week ago, down 7.2% from four weeks ago, and down 8% from the year ago mark. The refinance index increased 3.3% from the prior week, was down 0.4% compared to levels four weeks ago - and finished the year up a huge 60.4% from the 2011 mark.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
