Daily Commentary by Larry Baer: The private Institute
of Supply Management said
a survey of its members - executives tasked with ordering raw materials for the
manufacturing process - climbed to 51.5% in September from 49.6% in
August. The improvement in the composite
value was largely created by an uptick in both the pace of new orders and the
employment component of the overall index.
It was the first time since May the headline ISM Manufacturing Index
exceeded the 50.0% reading - a general demarcation point viewed by many
economists as indicating whether the manufacturing sector is in an expansion or
contraction phase. Mortgage investors
shrugged off this otherwise slightly mortgage interest rate unfriendly data as
most still firmly believe slower global economic growth and uncertainty
surrounding U.S.
fiscal policy with sharply limit manufacturing's contribution to economic
growth this quarter. As long as this
point of view remains unchallenged by forthcoming news and events - the support
mechanism for steady to perhaps fractionally lower mortgage interest rates will
remain firmly in place.
The
flight-to-quality of capital out of the stock markets and into the relative
safe-haven of Treasury debt obligations and agency eligible mortgage-backed
securities will likely pick-up a bit as the month of October progresses. Stocks remain poised for a potential major
top.
My timing models are
suggesting the period between Thursday, October 4th and Friday,
October 5th and the period from Thursday, October 11th
though Monday, October 15th carry a high probability of representing
a key turning point for stocks.
For what is worth -
Friday, October 19th will mark the 25th anniversary of
the 1987 stock market crash - a nasty collapse that saw the Dow give up roughly
39% of its value in a single month. If a
correction of that magnitude were to occur this time around -- the Dow would
fall from its current level of roughly 13,500 to something in the neighborhood
of 8,200. I'm not suggesting such a
thing is probable over the course of the coming month - but it is worth at
least noting that it has happened before.
In any case, a hard downward correction in the stock markets, should it
occur, will almost certainly prove supportive of steady to perhaps fractionally
lower mortgage interest rates. That is
the good news. The bad news is those
lower rates will not likely be met with increased mortgage demand - especially
on the existing and new home purchase loan side of the ledger. Heads up.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
