Stocks Getting Hammered Again….

Mortgage bonds are slightly lower in early morning trading, adding small signs of upward pressure to mortgage interest rates.  Stocks, on the other hand, are having a terrible day.  The stock market volatility in recent days has been reminiscent of a pre-bear market.  Although I’m certainly not saying that the current stock market challenges will lead to a bear market by any means.  I’m acknowledging that pre-bear markets experience sharp moves in both direction.  The increased volatility shows a lack of a clear direction.  However, I continue to see this as a healthy move for stocks.  It isn’t good for any market to climb as stocks have without at least a mid-cycle correction.

This morning’s Personal Consumption Expenditures (CPE) report showed that Headline inflation levels increased from 1.5% to 1.6%.  However, this reflects moves in volatile oil prices which were certainly impacted by the recent increase in geo-political tensions involving the US and Iran.  When stripping out oil and food prices, the Core rate remained steady at 1.6%, which was in line with the market’s expectations.  Since this is the Fed’s favorite gauge of consumer inflation, there is no immediate concern for the mortgage interest rate market.

Given that each of the two times mortgage interest rates have hit this low level it was immediately followed by a sharp move higher, we will maintain a locking bias.