This morning’s headlines read “US stocks rebound” as the Dow opened 300 points higher after 2 days of the biggest drops we’ve not seen since February. But now, a few hours into the trading day and most of the gains are gone. The Dow has given back around 50% of its gains this year, so a definitive break below this point and its likely a drop down to the next level last seen in July. What took 3 ½ months to gain might be given back in just 7 trading days. Today’s shift in momentum from opening higher and now moving back to the red potentially, is an indication that investors are just not sure that they like the idea of markets running more on their own without the Fed ready to subsidize any potential obstacle.
What has this meant for mortgage rates? At the moment, they have stopped their definitive move higher; at least for the last few days stocks have been selling off. The concern is always trying to determine if this is just a pause before the next leg higher, or could it be a reversal to rates moving lower? We will have to take our cue from the stock market direction, but the dominant trend for rates is still higher, so we will maintain a locking bias.