MARKET NEWS
Wednesday's bond market has opened down slightly despite sizable losses in the major stock indexes. Stocks are reacting negatively to concerns about overseas financial issues and not this morning's abundance of economic data. The Dow is currently down 163 points while the Nasdaq has lost 46 points. The bond market is currently down 4/32, which will likely push this morning's mortgage rates higher by approximately .125 - .250 of a discount point.

The trading week, for all practical purposes, ends today but we won't be heading into the holiday quietly. We had four economic reports posted this morning and have another Treasury auction to watch early this afternoon. The Labor Department started the economic releases with an announcement that 393,000 new claims for unemployment benefits were filed last week. This was a small increase from the previous week's revised total, keeping it in line with forecasts. That makes the data neutral towards mortgage rates, but since this data tracks only a single week's worth of new claims, its impact on mortgage rates is usually minimal.

October's Durable Goods Orders was also posted at 8:30 AM ET, revealing a 0.7% decline in new orders at U.S. factories for big-ticket items. This was slightly stronger than expected, but the reading that tracks new orders excluding typically larger transportation-related products rose 0.7% when forecasts were calling for no change. That can be considered a sign of economic strength, making the data slightly negative for the bond market and mortgage rates.

The third report of the morning was October's Personal Income and Outlays data that showed a 0.4% increase in personal income and a 0.1% rise in consumer spending. These results were fairly neutral for bonds and mortgage pricing because the income reading was stronger than predicted (consumers have more money to spend) but the spending reading fell short of forecasts. I would consider the spending surprise more important than the stronger level of income, making the report slightly positive. However, the market appears to be ignoring this report in today's trading.

The revised November reading to the University of Michigan's Index of Consumer Sentiment was today's last economic report. It showed a reading of 64.1, which pegged forecasts and nearly matched the preliminary reading of 64.2. That indicates that consumer sentiment didn't change much from the preliminary reading earlier this month, making the data neutral towards mortgage rates.

Later today, the results of the 7-year Treasury Note auction will be posted. Yesterday's 5-year Note sale went well with several indicators showing strong investor demand. That helps us remain optimistic about today's auction as these securities are tied closer to mortgage bonds than yesterday's were. If we get strong results at 1:00 PM ET, we could see the bond market improve. However, with bonds still in negative territory with stocks showing sizable losses, it is difficult to believe that today's auction result could fuel a bond rally and improvements to mortgage rates. In other words, even if the sale goes well, it is hard to believe that bonds will react enough to cause mortgage rates to move lower this afternoon. It appears that the tone in the bond market is set already.

Yesterday's FOMC minutes didn't really give us much of a surprise regarding monetary policy and interest rates. Although we did see some interesting discussion about the Fed trying to give the public more information about what will cause them to start raising key short-term interest rates. More information to the markets and public is always a good thing as it helps remove the uncertainty and volatility in the markets as traders try guess what a particular comment or action means to future Fed moves. They opted at this meeting to make no changes to current procedures, but I am assuming we will hear more on this topic in the coming months.

The financial markets will be closed tomorrow for the Thanksgiving Day holiday. There will not be an early close today ahead of the holiday, but the financial and mortgage markets will close early Friday and will reopen next Monday morning. I suspect that Friday will be a very light day in bond trading as many market participants will be home. Banks have to be open Friday, but we will probably see little change to mortgage rates that day.

We would like to take this opportunity to wish you and yours a happy and safe Thanksgiving holiday!