Daily Commentary by Larry Baer: Inflation at the
consumer level edged higher in September as the cost of gasoline surged. The Consumer Price Index increased 0.6% last
month, matching the August reading, according to data released from the
Commerce Department earlier this morning.
Most of the increase in the headline number was due to a sharp 7.0% jump
in gasoline prices, a hefty gain coming on top of a 9.0% price gain in
August. That was the bad news.
The good news is
that the core rate of inflation on Main Street
(a statistical value stripped of volatile food and energy costs) increased a
very modest 0.1% for the third month in a row.
Benign core inflation pressures tend to be supportive of the prospects
for steady if not fractionally lower mortgage interest rates.
In a separate
report, the Fed said U.S.
industrial production rose 0.4% in September, beating expectations. Capacity
Utilization, a value which measures the extent to which plants are achieving
their full potential output, rose to 78.3% from the prior month's 78.0%. Nothing for mortgage investors to be
concerned about as this reading is still well below 80% - a mark considered to
be the "tipping-point" where inflation creating bottlenecks might
reasonably be expected to develop.
Over the course of
the remainder of today's trading session the trend trajectory of mortgage
interest rates will be most strongly influenced by trading action in the stock
markets. Higher stock prices will exert
upward pressure on mortgage rates while lower stock prices will tend to be
supportive of steady to fractionally lower rates.
The
"wildcard" for the balance of the week will be Thursday's weekly
jobless claims report. Analysts
currently expect jobless claims will post a gain of 26,000 or so for the week
ending 10/13 - giving back most of last week's big decline. If so, the data will tend to be supportive of
steady to perhaps fractionally lower mortgage interest rates. In the unlikely event the jobless claims
numbers remain unchanged or show a further decline from the prior week - look
for mortgage investors to respond by pushing rates higher from current levels.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
