Mortgage Headlines
Mortgage rates on the rise
Fresh signs that inflation is on the rise kept sellers busy in the U.S. Treasury securities markets on Thursday. Traders continued to unload bonds as the prospect of further rate hikes loomed, sending Treasury prices tumbling further as their yields, which move in the opposite direction, continued to soar. And the yield on the benchmark 10-year note is close to a two-year high, which was hit in mid-June 2004. The surge in Treasury yields has forced lenders to increase mortgage rates, which move in sync with those yields.
Today's release of fourth-quarter gross domestic product, or GDP, put additional pressure on Treasuries. Although the final revision edged up to an expected 1.7 percent, core consumer inflation - one of the Fed's favorite inflation indicators - hit 2.4 percent, spurring another round of selling. Not only was this up from the previous 2.1 percent reading, but it is also well above the 2-percent 'comfort zone' ceiling associated with the Fed. Within the GDP, it was also reported that corporate profits hit a four-year high in the quarter, climbing 13.8 percent to $185.8 billion.
Adding to Treasury woes was a drop in first-time claims, as traders believe a strong job market could foster inflation. Although the numbers were somewhat skewed due to the introduction of seasonal factors, unemployment claims, for the week ended March 25, fell for the second straight week after three weeks of increases. Claims slid by 10,000 to 302,000, while the more closely watched four-week average, which smoothes volatility, dipped to 310,750.
Interest rates, oil weigh on the Dow, while Nasdaq flourishes
The steep rise in Treasury yields weighed on the Dow Jones industrials, with the blue chips selling off due to concerns about inflation and high oil prices, which rose again today. Oil climbed by 70 cents a barrel to close at $67.15. Twenty-three of the 30 Dow components ended in negative territory, led by GM, which shed almost 5 percent due to concerns about restating financials for GMAC and the possible sale of Isuzu Motors. Other significant losers included Caterpillar, which lost 1.7 percent, and 3M and Verizon, which each slipped 1.5 percent. Home Depot and Altria lost 1.3 percent each.
GE was the only component with a substantial gain, with its shares rising 2.12 percent. This was due to Morgan Stanley's suggestion that GE shares could double within the next three years. Microsoft added 0.8 percent, but other gains were modest at best.
Gains on the Nasdaq weren't spectacular, but the tech-heavy index managed to hit a new five-year high. Nokia, the No. 1 cell phone maker, rose 4.3 percent after raising its sales forecast. This not only boosted those in the sector, but also those who supply them. Ericsson and Motorola posted gains, and so did Cisco Systems, which added 1.9 percent.
Sun Microsystems, which has been on a tear of late, fell 1.9 percent, while Google lost 5.3 percent today on news that it has filed to periodically sell 5.3 million shares of its stock.
As of 4 p.m. EST:
The Dow Jones industrial index closed down 65 points (-0.58 percent) to 11,150.70; the Nasdaq composite gained 3.04 points (+0.13 percent) to 2,340.82, and the Standard & Poor's 500 index fell 2.64 points (-0.20 percent) to 1,300.25.
The 30-year Treasury bond closed down 27/32 in price with the yield rising to 4.89 percent, from 4.84 percent on Wednesday.
The 10-year Treasury note closed down 12/32 in price with the yield rising to 4.85 percent, from 4.80 percent on Wednesday.
The five-year Treasury note closed down 6/32 in price with the yield rising to 4.82 percent, from 4.80 percent on Wednesday. The two-year Treasury note closed down 2/32 in price with the yield rising to 4.83 percent, from 4.81 percent on Wednesday.
At 4 p.m. EST, average mortgage rates (zero discount points) based on rates collected nationwide were:
The 30-year conventional fixed-rate mortgage held at 6.182 percent.
The 15-year conventional fixed-rate mortgage was at 5.769 percent, down from 5.786 percent on Wednesday.
Coming up:
Friday will feature four reports, some more influential than others. First out will be personal incomes and outlays for February, which contains personal consumption expenditures. Personal income is expected to edge downward to 0.5 percent from the previous 0.7 percent reading. Spending also is likely to decline. Analysts are predicting a 0.1-percent increase, which is far below the 0.4-percent posted in January.
Also on the calendar is the University of Michigan's final consumer sentiment survey for March. Sentiment is expected to edge upward to 86.9 from the previous 86.7 of two weeks ago. Results of this survey have been flat for the past six weeks.
The Chicago purchasing manufacturers institute index of business conditions for March is also on tap. Pundits are forecasting an increase to 58.5 from the February reading of 54.9. This could bode well for the national ISM index on March manufacturing conditions, which is due on Monday. In a separate report, factory orders for February are expected to rise 1.2 percent, which would be a big increase from the 4.5 percent decline in January.
Mortgage rates were largely unchanged on Tuesday, but it is likely that lenders will begin edging them upward to keep pace with the increases in Treasury yields.
Interest.com will be closed on Friday, so the next report will be published/e-mailed on Monday, April 3.
Carolyn Siegel
Carolyn@interest.com
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