Stocks Make a Comeback

US stocks shot higher yesterday as investors sought opportunities to take advantage of undervalued investments. The move was highly technical in nature, with little fundamental news driving the move higher.


At 8:30 a.m. this morning, we will hear the final estimate of 1st quarter DGP. Given that the initial reports have not been impressive, markets will be looking to see if the results have been upwardly revised. If so, we could see stock momentum pick up once more. This would not be welcomed news for mortgage bonds, which have lost a great deal of steam the past few trading days.


Tomorrow is a significant economic news day, highlighted by the Personal Consumption Expenditures (PCE) report. Since that is the Fed’s favorite gauge of inflation, markets will certainly respond to the report. If it shows inflation is higher than expected, we will see upward pressure to mortgage interest rates. However, if the report is below expectations, we could see mortgage bonds move back above their 200-day moving average.


Unless mortgage bonds can make a rebound safely above their 200 DMA, we will maintain a locking bias.

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