Rates Improve with Mixed Corporate Earnings, July 20, 2010

Mortgage Rate Trend Direction:    Down

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

Key News:                                          US Companies Earnings

Summary

Mortgage rates rose yesterday when the stock managed to squeeze out a modest gain.  However, today markets are down in response to analyst's concerns over revenue projections from US companies for the balance of 2010.  The Housing Starts report from the Commerce department may provide further guidance for market.  The key driver for markets today and for the the near future are the earnings reports from US companies.  Mortgage rates are poised to open down from their close yesterday.

Impact of economic reports

At 8:30 AM ET this morning the US Department of Commerce released its monthly report on the number of new home starts.  The results were even lower than the already very low expectations.  A glimmer of hope that the housing construction market may have bottomed may have been visible in the increased number of permits issued for new homes.

After the close yesterday IBM and Texas Instruments reported earnings.  Today's corporate earnings reports were highlighted by Goldman Sachs, Johnson and Johnson and two regional banks: Bank of New York and State Street   All of these companies reports were disappointing to analysts. The issues of concern focus on the declining revenue numbers and projections for the rest of 2010.  The difficulty in generating revenues are reflective of a slowing economy, and perhaps, the impact of increased government regulation.

Impact of political or international events

European stock markets are trading lower for the fifth straight day.  Concerns remain over the results of the "stress tests" on 91 European banks that are scheduled to be released at the end of the week.  Additionally, a bond auction in Hungary was not as successful as hoped.  Hungary is balking at demands from the International Monetry Fund and the European Union to cut its spending.  In general, the economy and banking system in Europe continue to be at risk, which increases uncertainty in the US and contributes to the volatility we are seeing in day-to-day mortgage pricing.