Mortgage Rates Take a Breath, August 17, 2010

Mortgage Rate Trend Direction:     Up

Economic Reports/Rate Impact:    Housing Starts, 8:30 AM ET, Moderate Rate Impact

                                                              Producer Price Index, 8:30 AM ET, Moderate Rate Impact

                                                              Industrial Production, 9:15 AM ET, Moderate Rate Impact

Key News:                                            US Companies Earnings

All signs in pre-market activity point to stocks openning higher today with bonds, including mortgage-backed securities, being lower in price.  Data released today coupled with earnings news is taking precedence in the minds of traders over last weeks commentary from the US Federal Reserve. Consequently, when lenders release their initial pricing this morning (9:45 AM ET--10:15 AM ET), mortgage rates are expected to be higher than they finished the day yesterday.

Impact of economic reports

The economic reports released today were all generally positive--well at least they were not negative.  This may suggest that our period of slowing economic growth may be reaching a bottom.  Housing starts actually increased from last month (though permits for future construction fell).  Inflation appears under control in the manufacturing sector according to the Producer Price Index.  Finally, the Industrial Production report was better than anticipated, indicating more manufacturing activity than had been forecast.

On the earnings front, Walmart, the nations largest company and employer report strong earnings that were better than analysts forecasts.  The company also raised its expectations for the balance of 2010--a good sign that the economy may avoid a so-called "double-dip recession".

Impact of international or political events

International markets are generally lower today ins response to the down day in the US yesterday.  Also, concerns of dramatically slower growth in Japan and concerns regarding the ability of the economy in China to continue its high growth rate are contributing to a down day in Asian markets.