The stock market is attempting to stabilize following yesterday’s steep losses. As expected, China announced a retaliatory attack on the tariffs announced by the Trump administration. However, their response was weaker than many expected. Therefore, the U.S. stock market has been able to limit its losses on the day. But be cautious. Stocks appear to remain vulnerable, as they are stuck in the middle of a wide trading range. We could see prices move either way. My guess is that they will weaken and lose their gains as the day wears on.
Yesterday’s stock market fall led to a flow of money into the bond market, which helped to temporarily improve mortgage interest rates. However, the move wasn’t strong enough to help bond prices break above the ceiling of resistance. Since this level was again impenetrable, we can now expect bond prices to fall back down to the bottom of the trading channel. Ugh….
Durable Good orders for the month of February were released this morning. The Headline number rose a shocking 3.1%, which was well above the 1.7% expected by the markets. This points to a stronger than expected GDP for quarter 1, which is good news for the stock market and not good new for mortgage interest rates.
With the stock market experiencing extreme volatility, bond prices could continue to bounce as well. We will continue to maintain a locking bias.