Stock Prices Heading Lower Again

Stocks are starting the day lower in early market trading, as fear continues to plague the stock market. With corporate earnings per share dropping and the average price / earnings ratio becoming bloated, the record high prices we have seen in the U.S. stock market have not truly been justified. Historically, stock prices have reflected a view of what the future is expected to hold in terms of earnings and GDP. The market got to a point that had little to justify prices. It was as if investors were intoxicated on hopeful profits to be made. It’s hard to say if the weakness will lead to an eventual bear market just yet. However, it will come. The only question is – when?

Mortgage bonds are showing some strength. However, since bond prices are in a short-term downward trading cycle, they may have a difficult time making any reasonable gains. My expectation is that bond prices will touch the bottom of the channel before they can muster the strength to climb above the top. So, although stocks are falling and the 10 Year Treasury Note yield is falling, I still don’t see mortgage rates making any significant improvements in the very near term. Once bond prices hit the bottom, that’s when I expect to see something positive happen. In the meantime, I wouldn’t get too excited.

I see the risk of mortgage pricing worsening slightly in the coming days. Since I don’t expect too much damage, there isn’t a real rush to lock. If you choose to float, do so carefully.