Princeton Capital Blog

Market Commentary

August 30th, 2011

Today’s bond market is in positive ground due to a sizable drop in consumer confidence. The stock markets initially fell well into negative ground after this morning’s economic data was posted, but has since recovered those losses. The Dow and Nasdaq are both now nearly unchanged from yesterday’s close. The bond market is currently up 18/32, which should improve this morning’s mortgage rates by approximately .250 of a discount point.

The Conference Board gave us this morning’s economic news late this morning with the release of August’s Consumer Confidence Index (CCI). They announced a reading of 44.5 that fell drastically short of expectations. Analysts were expecting to see a reading of 52.0, meaning that surveyed consumers were much less confident about their own financial situations than many had thought. In fact, the reading of 44.5 was the lowest we have seen since April 2009. This is very good news for the bond market and mortgage rates because waning confidence usually means consumers are less likely to make a large purchase in the near future.

Later today, we will get to see the the minutes from the last FOMC meeting. There is a pretty good possibility of the markets reacting to them following their 2:00 PM ET release, especially if they show some divisiveness by its members. It will be interesting to see some of the Fed member’s views on the economy and inflation and if they will hint what the Fed’s next move may be, particularly about the need for more economic stimulus. But this is one of those events that can cause significant movement in rates after its release or be a non-factor. I suspect that this particular release will cause movement in bond prices, but not enough to significantly affect mortgage pricing.

Tomorrow’s only important news is July’s Factory Orders data. This report measures manufacturing sector strength and is similar to last week’s Durable Goods Orders, but includes orders for both durable and non-durable goods. It is expected to show a 1.8% increase in new orders. A smaller than expected rise would be favorable for bonds, but I don’t see this data causing much movement in rates unless its results vary greatly from forecasts since the big-ticket products portion of the report was released last week.

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