Mortgage rates have improved meaningfully over the past several days. Today is also likely to be positive for rates, yet the primary goal will be to hold the gains previously attained. On-going fears regarding the debt troubles in Europe are once again providing the momentum for trading today. With limited important US economic data today and no progress on the US debt ceiling/deficit reduction talks there appears little possibility of a major reversal for rates today. Home purchasers and refinancers should lock-in mortgage current mortgage rates if possible.
Discussions today in Europe to provide a fresh approach to the debt crisis in Greece and fears the crisis is spreading into Italy and Spain had our markets poised for another major stock sell-off this morning. However the market has now turned modestly positive in pre-opening trading. What happened? First, the discussions about Greece included the concept of Greece defaulting on some bonds which most market observers see as inevitable and necessary. Second, news that the European Central Bank may be purchasing Italian bonds to counteract the impact of traders who have been dumping that debt, calmed the market.
Attention today may then turn to domestic economic news. Trade Balance figures were released at 8:30 AM this morning and showed a much higher trade deficit than had been forecasted. This indicates that US companies are not producing goods domestically despite demand from consumers. This provides further evidence that US companies simply are not comfortable adding jobs either due to the sustainability of market demand or uncertainty due to tax and regulatory policies.
Also impacting US markets today and over the next few weeks are the earnings reports of US public companies. Yesterday, at the market close, Alcoa reported earnings that were in-line with previously announced expectations. However, as their report date approached many analysts had been suggesting that the earnings might actually fall short of expectations. What is the implication of their “good” earnings? Perhaps it is simply that the economy is okay—not great—not consistent—but good. As additional companies report earnings today and over the next few weeks, the true picture of the US economy will emerge. Mortgage rates will likely follow–up on good earnings–down on poor earnings.
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