Daily Commentary by Larry Baer: There
was a tidbit of upbeat economic news contained in this morning's September
Consumer Confidence Index and the July S&P/Shiller composite home price
index. Both reports are generally
considered to be second-tier data - but with nothing else to consider - these
two reports drew a little passing attention from investors.
The S&P/Shiller data showed single-family
home prices rose for a sixth month in a row in July, though the improvement was
not as strong as expected. The composite
index of home prices in 20 metropolitan areas gained 0.4% on a seasonally
adjusted basis, well shy of most analysts' expectations calling for a gain of
0.9%.
The private Conference Board's index of
consumer confidence surged 70.3% in September to its highest level since
February, blowing away expectations of a modest gain. A significant rise in the expectations
segment was the primary driver of the gain.
Investors are far more interested in what consumers are actually doing -
rather than how they say they are feeling.
In order for consumer confidence to continue to grow a more robust job
market recovery is needed - a condition not expected to show notable
improvement for several more quarters.
With consumer's attention soon shifting to the presidential election and
blaring new headlines surrounding the approaching national debt fiscal cliff,
consumer confidence in coming months will almost certainly weaken. For these reasons investors chose to
completely shrug off this report.
Mortgage investors will likely take
directional cues from stock prices as they go about the business of setting
interest rates today. Should stock
prices trade notably higher -- look for mortgage rates to trade fractionally
higher as well. It will likely take a
rather sharp sell-off in the stock markets to provide enough momentum to drag
mortgage interest rates notably lower from current levels.
Still to come -- Wednesday's August New Home
Sales figures and Thursday's trifecta of August Durable Goods Orders, weekly
jobless claims numbers and the final revision to Q2 Gross Domestic Product will
all be overshadowed by the Treasury Department's three-part, $99 billion note
auction schedule to run from Tuesday through Thursday. $35 billion of 2-year notes will hit the
auction block today, followed by $35 billion of 5-year notes on Wednesday and
the whole thing will wrap-up with the sale of $29 billion of 7-year notes on
Thursday. Demand for all three offerings
is expected to be strong enough to avoid creating much, if any upward pressure
on mortgage interest rates.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
