Mortgage Rates' Slow Move, September 9, 2010

Mortgage Rate Trend Direction:     Up

Economic Reports/Rate Impact:    Jobless Claims, 8:30 AM ET, Trade Balance, 8:30 AM ET

Key News:                                           Economist Argues Against European Austerity Measures

Summary

Yesterday's modest stock market gains and the lack of any surprise from the Federal Reserve's Beige Book put us in position for another positive day for stocks.  Today jobless claims and trade balance figures will provide direction.  I expect mortgage rates to continue to a slow rise today.

Impact of economic reports

Two positive reports today are sending stocks higher in early trading.  Jobless claim numbers dropped a fair amount this week, below analyst estimates.  Also, there was a marked improvement in the US trade deficit for August indicating somewhat better sales of US goods and services globally.  With no additional reports due today, tomorrow or next Monday, the upward trend in mortgage pricing is likely to continue.

Impact of international or political events

Joseph Stiglitz, Nobel Prize winning economist and adviser to President Obama has been quoted as saying that planned spending reductions in European nations will extend the global economic slowdown rather than improve conditions.  He believes that such austerity measures in Europe will lead to a deeper slowdown in the US as well.

It is not a stretch to believe that Mr. Stiglitz opinion on US government spending is similar.  Whether or not the Obama administration follows this advice going forward will have major influence on markets and mortgage rates over the next year. 

Personally, I believe it is imperative that US spending for the mid to long-term be significantly reduced or inflation and interest rates are likely to rise to levels that could dramatically damage long-term growth prospects and quality of life in the US.