Mortgage rates appear likely to hold near current levels despite a surprise in the Durable Goods report this morning. Traders appear to be “keeping their powder dry” today as they wait for Federal Reserve Chairman Bernanke’s speech from Jackson Hole, Wyoming on Friday.
The gloom and doomers have been crying for weeks that a recession was on its way, yet the data simply don’t back it up. Today’s durable goods orders report was twice as strong as analysts had forecasted with particular strength in cars, trucks and planes. While some analysts did point out that capital spending for non-transportation related and non-defense related goods did decline modestly, the fact remains that the overall report is much better than expectations.
With no further data to consider today and only weekly jobless claims coming tomorrow it is likely that traders will want to keep current positions intact prior to Friday’s Bernanke Speech and revised Gross Domestic Product data. Yet even that fresh information on Friday is likely to disappoint the markets who want clarity in direction. The back and forth markets perfectly reflect an economy that is “trudging through mud”—making progress, but at an exhausting and painfully slow rate.
I have predicted here before that I believe the markets could be highly disappointed with Chairman Bernanke’s speech on Friday. I do believe he will state that the Fed has options available to stimulate the economy, but he will be vague regarding a description of those options as well as possible triggers for their use. Lest we forget, the Chairman fired perhaps the biggest weapon he had left just a month ago by pledging to keep the Fed Funds rate at 0% through mid-2013. Mr. Bernanke made it clear at that time that the troubles in the economy were now less about liquidity and monetary stimulus and more about policy and political matters.
There is a real opportunity for current mortgage rates for purchase and refinanced loans to head lower if my analysis of Mr. Bernanke’s position is accurate. Mark Friday on your calendar—it could be an historic day!
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