Advanced 3rd Quarter GDP hit the tape better than expected at plus 3.5%. Economists were looking for a 3.3% print while Goldman Sachs revised their number (yesterday) to plus 2.7%. The better than expected number was driven by durable goods (plus 3.4%) and personal consumption (plus 2.36%). In reality, this number caught at least ½ of its gain from Cash for Clunkers and inventory rebuilding. Although important, they are in the rear view mirror, making the road ahead still full of hairpin turns.
Weekly Claims dropped 1K to 530K and Continuing Claims fell a staggering 148K to 5.797 million. The number to focus on here is the Weekly Claims, still maintaining a 500K plus per week average layoff run rate. This is 500,000 people per week losing their jobs. Not the makings of a healthy consumer. Wouldn’t it nice if the White House would move this to the front burner. Instead we have the Treasury Secretary testifying on Capitol Hill, endorsing Barney Frank’s bill for “a strong framework for achieving a safer, more stable financial system.” Trouble is they want to give the Treasury Secretary the power to approve or not to approve the Fed’s decisions on systemic risk. Sounds a little too political for me.
All of the above has put a little volatility back into the market. Currently, the 10 year note is down 20/32’s (yield 3.49%), MBS down 6/32’s, and stocks up 75 points on the big board. Stocks will hold the key as to where Austin mortgage rates go next. The current pattern (stocks) has been for sellers to lean on the market when it rallies (5 out of the last 7 days). We will want to watch the late afternoon trade (from 2:00 to 3:00 cst) to see if they can hold today’s gains. Failure to do so will improve mortgage pricing while a positive close, especially 50 points or more, will put additional pressure on our stuff.
Technically, the selling today has pushed hourly charts into new sell signals (bearish) yet daily time frames remain neutral. Overall, the charts point to another ½ point of weakness on the 10 year note but will take a back seat to the stock market trade. We also have 31 billion of 7 year notes on the auction block. We’re expecting this to go off without a hitch.
I’d like to wish you a frightening day tomorrow and the best sugar high Halloween ever.