Daily Commentary by Larry Baer: Mortgage
investors have nothing in the way of first-tier economic data to digest until
Friday morning's release of the September nonfarm payroll figures. In the interim - trading activity in the
stock markets will likely exert a rather high degree of influence on the trend
trajectory of mortgage interest rates.
Higher stock prices will tend to increase the upward pressure on rates
while lower stock prices will likely prove supportive of steady to perhaps
fractionally lower mortgage interest rates.
As I mentioned in
this space yesterday -- 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 (a point where the last buyer has been
identified and satisfied - leaving sellers to become an increasingly dominant
force in the marketplace.
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
