Daily Commentary by Larry Baer: Global investors are scaling back bets for further economic stimulus coming anytime soon from Fed Chairman Bernanke and his fellow members of the Open Market Committee. In his semi-annual testimony to Congress regarding monetary policy issues Bernanke offered a cautious view of the current state of the U.S. economy - but stopped short of signaling further "QE3" driven bond or mortgage-backed securities purchases from the Fed were imminent. Without the prospect of a big noncommercial buyer with a printing press capable of pumping out unlimited amounts of dollars likely to enter the market in the near term - investors chose to take profits and move toward the sidelines - a process that produced much of the slight upward pressure on mortgage interest rates felt over the past two days.
In terms of economic news -- the private Institute of Supply Management reported earlier this morning that growth in the U.S. manufacturing sector unexpectedly cooled in February. The ISM said its index of national factory activity fell to 52.4% last month from 54.1% the month before. The February reading was well shy of most economists' expectations of 54.5%. U.S. manufacturing has been a bright spot in the global economy -- but today's ISM data gave a tentative sign that headwinds overseas could be catching up with American manufacturers.
The probabilities are high this major bit of news was not missed by mortgage investors who see it as supportive of the prospects for steady to perhaps fractionally lower interest rates ahead. Even though the mortgage market is currently experiencing some selling pressure - this data suggests that we are not likely to see a major shift to notably higher mortgage interest rates anytime soon.
In a separate report, the Labor Department said new claims for government unemployment benefits edged down last week, holding near four-year lows. Initial jobless claims fell 2,000 to a seasonally adjusted 351,000. The prior week's figure was revised up to 353,000 from an originally reported 351,000. The collective data suggests while employers are holding on to workers there is little sign anybody is aggressively adding more employees to their existing payroll headcount.
The February Personal Income and Spending figures, also released this morning, highlighted the fact that while incomes were rising modestly a pickup in inflation - due to higher rents and gasoline prices -- were absorbing almost all of the modest gains in paychecks. Without the financial firepower to boost consumerism this data series adds another piece to the growing body of evidence suggesting future economic growth will likely remain anemic - a condition almost sure to prove supportive of generally steady to perhaps fractionally lower mortgage rates.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
