Stocks Break Higher, for Now

Mortgage bonds attempted to break above the 100-day moving average and were quickly rejected and pushed lower. This is not a good sign for the near-term direction of mortgage interest rates, as bonds prices have a long way to fall before hitting significant support. The rejection was also timed with stock prices climbing above record high levels. At this point, it’s too early to say if stocks will be able to maintain and have a decisive break above this critical level. If stock prices do continue to climb, we can expect to see mortgage interest rates take another step higher. However, if stocks lose momentum, that would help mortgage bond prices improve, driving interest rates lower.

Today is a quiet day for scheduled economic reports. However, next week will be full of potential market moving data. The two reports to watch will be the Federal Reserve interest rate decision on Wednesday, followed by the Bureau of Labor Statistics (BLS) report showing new job creations for the month of October on Friday. We will likely see an increased amount of volatility in both the stock and bond markets as we approach both reports. So, it seems that we need to prepare for rates to get worse before we see them getting better.

We will maintain our locking bias.