March 5, 2009

Stocks have continued to be bullied around, down 250 points near session lows as we enter the last half hour of trading.  Blame a fair share of this on China, pulling their expected second stimulus package off the table this morning.  As you may remember, the stock market rallied yesterday on the expectation of that announcement.  Dashed hope have gave way to the evaporation of all of yesterday’s stock gains plus another 100 points to boot.

Bonds, notes, and mortgage backs have been the benefactor as the 10 year note is currently up over 1 and ½ points while MBS has gained 17/32’s from yesterday’s close.  Earlier today, Weekly Unemployment Claims fell 31K, Continuing Claims dropped 14K, Factory Orders down 1.9% with ex-transportation down .9%, and Productivity down .4%.  Stocks look terrible but are trading at 12 year lows, which have a tendency to reverse trends (3 time in prior history), this maybe the time to nibble.

Mortgage back pricing looks very good and with bonds/notes up against stiff overhead resistance, this is a good time to lock in a few, using the float down of course as tomorrow’s release will need to be very ugly to produce additional gains in mortgage pricing.  In other words, your risk reward for additional rally (better mortgage pricing) is quite low.