Daily Commentary by Larry Baer: The House of Representatives is set to vote
today on a bill to extend the government's debt ceiling until May.
The bill is expected
to be presented for a vote sometime around noon to 1:00 p.m. ET today. If
it passes, the stock markets will likely extend recent gains at the expense of
slightly higher mortgage interest rates. Any inconclusive action on the
part of Congress and/or the White House will almost certainly create selling
pressure in the stock markets to the benefit of steady to perhaps fractionally
lower mortgage interest rates.
I'll post results on
my website as soon as they become available. Early market indications
suggest the bill will pass the House and will be delivered to the Senate where
it will likely be approved as well. The President has only ready
indicated he will sign the bill if it is approved by both chambers of Congress.
This whole thing
temporarily lifting of the federal debt ceiling is nothing more than an
exercise in "kicking-the-can-down-road" There are
ultimately more budget battles coming between now and May -- but the drama of a
last second congressional financial "save" will not be something
investors have to deal with in the immediate future - and that is a condition
that will likely produce relatively steady to perhaps fractionally higher rates
for the next week or two.
Don't get me wrong -
I see nothing that indicates mortgage interest rates are poised to make a move
anytime soon to dramatically higher levels. I simply want you to be aware
the probability rates creep higher than current levels in the near-term is
ramping up noticeably.
The ceiling
currently holding mortgage interest rates down may soon get some reinforcement
from the stock markets. My models continue to flash signals suggesting
the stock markets are poised for a sizeable sell-off - which may begin as early
as this week. With that said. I see a much stronger likelihood the first
meaningful signs of a sell-off in the stock markets will begin to appear in a
more convincing manner between late February and early March with the DJIA
trading in a range between 13,800 and 14,000 (as I write the Dow is trading in
the 13,700 range). If my assessment proves accurate, look for capital
flowing out of riskier asset classes like stocks to follow the well-worn path
back into the safe harbor
of Treasury debt
obligations and agency-eligible mortgage-backed securities. The stronger
the stock market sell-off -- the greater the prospects for fractionally lower
mortgage interest rates.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
