It’s early on Monday morning and the market already looks like Ventura Highway. Stocks were lower in pre-market trading (bonds higher) until Fed Ex came out and revised 3rd quarter earnings (quarter ending 8/31) up 20 cents a share and pushed guidance higher for the remainder of the year. Stocks turned around, going positive and as a consequence, bonds, notes, and mortgage backs took a dip.
Then along came New Home Sales, expected to be 320K annualized units. The print was much better than that, up 24% to 330K units. Stocks got another boost (now up 68 on the big board) as fixed income instruments (such as mortgage backs) dipped a little deeper. Currently, the 10 year note is off 10/32’s (yield 3.03%) while MBS are off 4/32’s (tighter spreads which is good). We also had the Chicago Fed National Activity Index out, which dropped .94 to its worst level since October. Manufacturing output, or the lack thereof, did the trick.
Fast money is selling the long end of the curve, dragging the 10 year note along with it. Not a lot of downside is expected from here. The week ahead will feature Case Shiller Home Prices, Consumer Confidence, Durable Goods, Weekly Claims, and GDP on Friday. Good week for data and market moving volatility. For the week ahead, we see the market weaving and bobbing with a neutral/bearish type bias as investors will be looking to buy treasuries at yields slightly higher than current. We still like the market long term as the detours are everywhere.
Short term, Austin mortgage borrowers are encouragerd to stay defensive.