Daily Commentary by Larry Baer: Earlier this morning the Commerce Department said its final revision to its "guesstimate" of the pace of fourth-quarter economic growth remained unchanged at 3.0%. Details of the report showed the improvement over the last three months of 2011 was strongly underpinned by inventory rebuilding. Excluding inventories, the economy grew at an unrevised 1.1% rate - a sharp step-down from the prior quarter's pace of 3.2%. Corporate profits before-tax fell 0.4% quarter-over-quarter, down from a 1.2% increase in the third-quarter. This is the first quarterly decline in profits since the fourth-quarter of 2010. The economy's momentum has slowed this quarter amid signs of cooling in manufacturing, business spending and a pause in the housing recovery -- even as the labor market shows modest signs of improvement.
According to a separate report from the Labor Department, the number of Americans standing in line to file first-time claims for government unemployment benefits fell 5,000 during the week ended March 24th. Many economists had anticipated this week's drop in jobless claims would be even greater. I suspect the reason the decline in jobless claims was not stronger this time around (and why subsequent improvement in the jobless claims data may fall short of expectations) will prove to be the result of businesses becoming increasingly cautious about adding additional headcount to their payrolls until new convincing signs of accelerating economic growth both here at home and aboard are more evident. If my assessment proves accurate, mortgage interest rates will not likely move above their mid-March highs for several more weeks yet.
The final Treasury auction on this week's economic calendar is today's sale of $29 billion worth of 7-year notes. This offering will likely draw decent, but otherwise uninspiring demand from both domestic and foreign investors. If so, it would not be unreasonable to expect mortgage investors to respond with a slightly mortgage unfriendly adjustment in either rate or price - or both.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
