Daily Commentary by Larry Baer: The
Commerce Department reported earlier this morning that durable goods (items
manufactured to last three-years or more) tumbled an astounding 13.2% last
month, the largest drop since January 2009, when the economy was in the depths
of the recession. Boeing received only
one aircraft order in August, down from 260 in July, accounting for the bulk of
the decline. Demand for motor vehicles
fizzled as well. Excluding the
transportation component - new durable orders were still down 1.6% on a month-over-month
basis in August.
The sharp drop for durable goods orders underscored
the weakness in the economy, whose growth pace in the second-quarter was cut
from a 1.7% to a 1.3% pace as the government data wonks published their final
"guesstimate" of Gross Domestic product for the April through June
time frame this morning.
In a separate report, the Labor Department
said the number of Americans standing in line to file first-time claims for
government jobless benefits fell 26,000 last week to a two-month low of
359,000. The average of new claims over
the past month, a more accurate picture of labor market trends, fell by 4,000
to 374,000 - essentially unchanged for 2012.
The economy is creating just enough jobs to
keep up with the growth of the working-age population, but nothing much more
than that. Manufacturing, which has been
the main driver of the recovery from the 2007 -2009 recession, has been
struggling to maintain forward momentum against the increasing headwinds of
sluggish domestic and global demand.
Continuing fears Congress could fail to avert a "fiscal cliff"
(the $500 billion or so in expiring tax cuts and government spending reductions
set to take effect at midnight on December 31st), on going debt
problems in Europe, and slowing global economic growth leave businesses with
little incentive to boost production and/or hiring.
The "so what" factor behind all
this statistical mumbo-jumbo is simple and straightforward - until more
sustained signs of global economic growth develop - the support mechanism for
steady to perhaps fractionally lower mortgage interest rates remains firmly in
place.
For the balance of the day mortgage investors
will likely take directional cues from trading action in the equity
markets. 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 -- the Treasury Department will
wrap up their three-day debt sale when the final gavel falls at this
afternoon's auction of $29 billion of 7-year notes (concludes at 1:00 p.m.
ET). Demand for this offering 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
