Stocks Strong but Somewhat Hesitant

Stocks are blasting higher today, following through on yesterday afternoon’s rally. At this point, they have recovered nearly half of their total losses sustained in the recent fall. Given that high volatility remains, it’s difficult to say if prices will get back quickly to pre-correction levels. Recent history of stocks would suggest yes. However, there is still a slight chance that we are now experiencing a “dead cat bounce.” This is where markets show signs of a rapid recovery just to experience elevated volatility that leads to another drop in the market. Regardless of the direction of the stock market, the bond market is still showing signs of a bear market. Based on this, it seems unlikely that we will see any significant improvements to mortgage interest rates in the near term. 

With very little scheduled economic reports today, markets will be closely watching the results of today’s 10-Year Treasury Note auction. If demand is weak, that will pressure interest rates higher.  However, if by chance the higher yield brings more buyers into the market than anticipated, we could see rates improve. Given the lack of recent support for bonds, that doesn’t seem overly-likely. However, we will have to wait and see.

We will maintain our locking bias.