Mortgage backed securities rallied in late afternoon trading yesterday, then proceeded to follow the trend higher (additional rally) early this morning.  Applications for mortgages in the latest MBA survey, jumped 11.1% on the purchase index and 3.2% for refinances.  Not bad as a little stability and hope seems to be entering the market.  Same thing with Wholesale inventories which fell twice as much as estimated (-1.5%), showing signs of a stronger draw down which should lead to a pickup in manufacturing activity. 

Another sign of economic stabilization.  Big news on the builder front today comes from Pulte Homes which said it will buy Centex Corp. for 1.3 billion in stock.  This would create the largest homebuilder in the U.S.  M & A activity (merger and acquisition) starting to pick up.  Another sign of stabilization in a recessionary economy.  The chart work on the 10 year note has had a bullish benefit from the “goose” higher, now leaning to the bullish side from oversold conditions.  It is not enough however to make the larger time frame, bearish trend, surrender.  In other words, take advantage of the rally as they are fickle and far between.  Currently, the 10 year note is up 5/32’s (yield 2.89%), mortgage backs are up 5 to 8/32’s, depending on note rate, and stocks are up 72 points on the big board.