Daily Commentary by Larry Baer: Mortgage
investors largely shrugged off this morning's news from the Commerce Department
indicating durable goods orders rose 4.2% in July - a very sharp improvement
over the 1.6% in June. As usual, the
devil is in the details. Orders for
goods such as machinery and communications equipment, a component of the report
the economists call "core capital orders", fell a surprising
3.4%. It was the strongest decline in
this measure of durable goods orders in eight months and is indicative of the
significant toll the uncertainty surrounding current government plans to slash
spending and raise taxes is taking on business confidence.
Credit market participants will now have to
wait and see whether today's sign of slowing in the manufacturing sector will
be the catalysts that induces Fed Chairman Bernanke and his fellow central
bankers to inject the economy with an additional $500 billion dose of fiscal
stimulus in the form of "QE3."
The coming week's three-part $99 billion
Treasury auction, revised "guesstimate" of Q2 Gross Domestic Product
and July Personal Income and Spending data will all take a distant backseat to
Friday mornings 10:00 a.m. CT speech by Fed Chairman Bernanke to the invited
delegates to the Kansas City Fed's Economic Symposium in Jackson Hole, Wyoming.
If Mr. Bernanke provides any hint in his
address the Fed is "on-go" to launch "QE3" before the end
of September --mortgage interest rates will likely slide notably lower even as
the stock markets soar. On the other
hand, if no such hint is forthcoming and/or if Mr. Bernanke indicates such a
move would be premature as the country waits for Congress to take action to
avert the looming "fiscal cliff" associated with current plans to
slash government spending and raise taxes -- stock prices will almost certainly
plummet while mortgage interest rates move sideways to fractionally higher.
Volatility in the mortgage market has the
potential to ramp up significantly over the course of the next two weeks with
Bernanke's speech next Friday and the release of the August nonfarm payroll
data on Friday, September 7th packing enough combined inherent power
to set the trend trajectory of mortgage interest rates into the first month or
two of 2013.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
