Mortgage Headlines
Mortgage rates carved in stone
U.S. Treasury securities gave back recent gains on Wednesday as an unexpected jump in a February manufacturing index reignited worries that Fed rate hikes might continue into the summer. The other economic news was accepted without consequence, but sellers had their way. Prices on Treasuries - especially longer-term debt - fell and yields, which move in the opposite direction of prices, rose. But mortgage rates, which generally move with the yield on the 10-year note, remain steadfast, as they have for the past several days.
The Institute for Supply Management index on February manufacturing conditions rose to 56.7, up from 54.8 the previous month and higher than the 55.8 that was forecast. Any number above 50 signals expansion in the sector. Within the report, new orders and employment rose, but prices paid - an inflation indicator - fell to 62.5 from 65. Bond traders generally focus on this component, but today it was ignored.
The report on personal income and spending for January could have boosted Treasuries, but it didn't. Income rose by a slightly stronger-than-expected 0.7 percent, but inflation took a bite out of income, posting a 0.5-percent increase. Personal spending dipped, showing a gain of 0.4 percent when 1 percent was forecast. A slowdown in spending can precede an economic downturn. The number that the Fed watches contained no signs of inflation. Personal consumption expenditures, or PCE, rose 0.2 percent in January and is now at 1.8 percent for the past 12 months. This is the lowest year-over-year PCE since March 2004, and below the 2-percent mark that is widely regarded as the Fed's 'comfort level' on inflation.
In a separate report, construction spending in January crept up 0.2 percent, missing forecasts for a 0.8-percent increase and coming in well below the 1-percent gain in December. Private residential construction spending rose 0.1 percent - down substantially from the 0.9 percent gain the previous month.
Stocks rebound
Decent economic news, a handful of good earnings reports and a rebound in the technology sector resulted in good gains on Wall Street. Once again, semiconductors led the way, followed by networking shares. Also on the move were transportation, oil and oil services. Oil prices edged up 23 cents, to $62.20 a barrel, in spite of a report showing higher-than-expected inventories.
An upgrade for chipmaker Altera got things going with a 5.7 percent gain, and National Semiconductor and Texas Instruments rose 5 percent and 7.8 percent, respectively. The Nasdaq also supplied fertile ground for bargain hunters, who moved in after Tuesday's 1-percent-plus sell-off. Autodesk, a software maker, walked away with a 12-percent gain on positive earnings, while networkers Ciena and Juniper Networks also had good sessions.
Big-cap networkers such as Cisco Systems and JDS Uniphase added close to 4 percent each, while Sun Microsystems and Qualcomm were each up about 2 percent. Outside technology, American Eagle Outfitters added 13.5 percent on hefty quarterly earnings.
Twenty-five of the 30 Dow Jones industrials closed in positive territory, but sizable gains were limited to just a few stocks. Of those that closed up, Hewlett-Packard was the big winner, adding 3.6 percent, followed by Caterpillar, with a 2.1 percent gain. AT&T and Exxon rose 1.9 percent each, and Intel entered the win column with a 1.2 percent advance. Another four components closed just north of 1 percent. GM led the losers with a 1.7 percent decline, due in part to a 2.5 percent decline in February sales. Other losses were modest.
As of 4 p.m., EST:
The Dow Jones industrial index closed up 60.12 points (+0.55 percent) to 11,053.53; the Nasdaq composite gained +33.25 points (+1.46% percent) to 2,314.64, and the Standard & Poor's 500 index rose 10.58 points (+0.83 percent) to 1,291.24.
The 30-year Treasury bond closed down 26/32 in price with the yield rising to 4.55 percent, from 4.50 percent on Tuesday.
The 10-year Treasury note closed down 9/32 in price with the yield rising to 4.58 percent, from 4.55 percent on Tuesday.
The five-year Treasury note closed down 5/32 price with the yield rising to 4.62 percent, from 4.60 percent on Tuesday.
The two-year Treasury note closed down 1/32 in price with the yield rising to 4.70 percent, from 4.68 percent on Tuesday.
At 4 p.m. EST, average mortgage rates (zero discount points) based on rates collected nationwide were:
The 30-year conventional fixed-rate mortgage at 5.973 percent, up from 5.969 percent on Tuesday.
The 15-year conventional fixed-rate mortgage at 5.585 percent, down from 5.591 percent on Tuesday.
Coming up:
On Thursday economic news slows to a crawl after an intense week, and the markets could take a breather. Only first-time unemployment claims for the week ended Feb. 25 are due, with analysts expecting an increase of 7,000 to 285,000. Unless claims are far above or below estimates, the report is not likely to influence trading.
Treasury yields moved back up again on Wednesday, but they appear to be moving in a narrow - albeit higher -- range. This should allow mortgage lenders to keep rates fairly steady.
Carolyn Siegel
Carolyn@interest.com
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