Mortgage Headlines
Rates Hold as Treasuries Rally
A weaker-than-expected report on Retail Sales for July, a new high for oil prices and a successful auction of 10-year notes brought buyers back to U.S. Treasury securities. Although buying wasn't rampant, it was steady enough to send prices up and yields, which move in the opposite direction of price, down to their lowest point in a week. Mortgage rates, however, had little time to react to today's drop in yields, remaining at newly elevated levels.
Retail sales grew by a healthy 1.8 percent, but fell short of the estimates for a 2.4-percent gain. The lion's share of sales, however, was due to 'employee-discount' pricing that bolstered auto sales during the month. When auto sales were excluded, sales rose a mere 0.3 percent. In the minds of bond traders this raised questions about strength in consumer spending. Another sharp rise in the price of oil - it closed at $65.80 a barrel - also led traders to think that consumers might curb spending as the price of gasoline soars.
First-time unemployment claims fell by 8,000 to 306,000, and the more closely watched four-week average fell to its lowest level since February, coming in at 309,250. Business Inventories in June tightened -- unchanged from May. Business Sales, however, climbed 0.7 percent - a big leap from the May reading of minus 0.1 percent.
Last-Hour Wall Street Rally Results in Big Gains
Stocks traded in positive territory all day, but a last-hour rally sent prices soaring. Corporate news, earnings, upgrades and a successful auction of 10-year Treasury notes (after disappointing 5-year and 3-year note auctions the previous two days) added to the bullish tone, with most Dow Jones Industrials posting good gains.
McDonald's led the Dow with a 6 percent gain on speculation that a private investment firm could buy a stake in the fast-food giant's real estate holdings. An upgrade for Alcoa sent its shares up 3 percent, and United Technologies matched that gain. Boeing added 2 percent and a handful of components were up more than 1 percent. Of the seven components that closed in negative territory, none lost even close to 1 percent.
Yahoo! got the buzz on the street, rising more than 2 percent on speculation that it will move into China via a share of Alibaba.com, a Chinese business website. But Qualcomm led the tech bellwethers with a 2.4 percent increase due to its acquisition of Flarion Technologies. The Nasdaq also got a boost from bellwether Ericsson, with a 2 percent gain, and Microsoft and Sun Microsystems, which each gained more than 1 percent.
At closing:
The Dow 30 Industrial Index rose 91.48 points or 0.86 percent to 10,685.89; the Nasdaq Composite index was up 16.74 points or 0.78 percent at 2,174.55, and the benchmark Standard & Poor's 500 Index climbed 8.68 points or 0.71 percent to close at 1,238.81.
The 30-year Treasury bond was up 27/32 in price with the yield falling to 4.52 percent versus 4.57 percent at Wednesday's close.
The 10-year Treasury note was up 15/32 in price with the yield falling to 4.33 percent versus 4.39 percent at Wednesday's close.
The 5-year Treasury note price was unavailable, but the yield fell to 4.18 percent versus 4.23 percent at Wednesday's close.
AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:
The 30-year Conventional Fixed-Rate Mortgage was at 5.733 percent from 5.72 percent at Wednesday's close.
The 15-year Conventional Fixed-Rate Mortgage was at 5.316 percent from 5.334 percent at Wednesday's close.
Coming Up
Friday's reports include the U.S. trade balance for June, U.S. Import/Export Price Indexes for July and the preliminary read on University of Michigan's Consumer Sentiment Report for August. Analysts are forecasting an increase in the trade deficit to $57.2 billion from $55.3 billion, and they are predicting a slight decrease in consumer sentiment - down to 96 from 96.5. Price indexes are never estimated. If the reports come in close to forecast, Treasury yields should hold firm and mortgage rates would likely remain near current levels.
Carolyn Siegel
carolyn@interest.com
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