Mortgage bonds are off to a slow start this morning, as they fight to maintain their position above their 25-day moving average. The lackluster performance was fueled by a strong reading from the Philly Fed Manufacturing survey that showed a reading of 21.8 compared to the expected level of 4.5. Since manufacturing has been a weak component of the US economy in recent months, this brings hope of better days to come.
Stocks have weakened in recent days, with the S&P 500 falling beneath the critical 3000 level. After forming a clear “head and shoulders” it was clear that a continued down-turn was inevitable. With the 25-day moving average not far beneath current stock chart levels, we can expect to see stock prices turn higher in the near term. Unless there are economic reports or some other unforeseen event, stock investors will soon be back on the “buying” wagon.
The “home improvement” boom we have experienced in recent years is dramatically slowing. This could be attributed to the number of homes on the market increasing. In times of low home inventory and steep climbs in home values, homeowners tend to opt for remodeling over selling and purchasing the home they hope to live in. This is a sign of a slowing housing market and a forward indicator of what is to come. This will keep home sales strong in the near-term, which is great news for the housing market right now. However, it doesn’t necessarily mean good things for the years to come.
With bond prices stalling, now is a good time to lock for those needing to close soon. In the longer term, I continue to believe rates will fall.