Daily Commentary by Larry Baer: Orders for goods manufactured to last three
years or more, aka Durable Goods, blew out economists' best estimates by
posting a gain of 4.6% in December - well ahead of the most optimistic
forecasts calling for a gain of 2.0% or so. It was the second best
improvement in this measure of economic activity in the past six months.
Excluding the volatile transportation component, orders were up a much milder
1.3%. Looking past the headline number, the overall story
told by the December durable goods orders data set is less than impressive -
but leaves manufacturing activity with decent momentum going into the first
quarter of 2013 - a condition with just enough influence to induce mortgage
investors to push mortgage interest rates a little higher today.
Uncle Sam will be
splashing around in the credit market this afternoon looking to borrow $35
billion in the form of 2-year notes. Demand from the foreign investment
community for this offering is expected to remain high - a condition that help
curtail the current upward pressure on mortgage interest rates. The
auction will conclude at 1:00 p.m. ET and I'll post the auction result on my
website as soon as possible once the final gavel falls.
My models are
suggesting a disconnect exists between the reality of sputtering economic data
and "kick-the-can-down-the-road" politics and current stock market
levels. There seems to be broad based complacency related to this
apparent mismatch. Even at the risk of being found guilty of howling at
the moon - I have to say the probabilities appear to be very high the stock
markets are vulnerable to significant sell-off sooner rather than
later. If this assessment proves accurate, the flow of capital
fleeing the crumbling stock markets for the relative safety of Treasury debt
obligations and agency eligible mortgage-backed securities will soon resume --
providing solid support for the prospects of steady to perhaps fractionally
lower mortgage interest rates. I don't think there is much more
than two or three weeks left before my projections here are either proven
largely, if not totally inaccurate - or dead-on the money. Heads up.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
