MARKET NEWS
Tuesday's bond market has opened in negative ground despite weaker than expected economic news. The stock markets are showing noticeable gains despite that sales data. The Dow is currently up 94 points while the Nasdaq has gained 14 points. The bond market is currently down 7/32, which will likely push this morning's mortgage rates higher by approximately .125 of a discount point.

The Commerce Department reported early this morning that retail level sales rose only 0.2% last month. This was well below forecast of a 0.6% increase. Even if more volatile auto sales are excluded, we saw figures that were well below expectations. This indicates that consumers were spending last much like analysts had expected, hinting at slower than forecasted economic growth. Since it points towards weaker economic conditions, today's news should have been good news for the bond market and mortgage rates. However, it appears that traders are not too concerned with the data and are probably waiting for this afternoon's event before reacting to it.

This afternoon's event is the 2:15 PM ET adjournment of the last FOMC meeting of the year. There is not much debate about what the Fed will do at this meeting with no chance of them raising key short-term interest rates. Therefore, the post meeting statement will likely be the sole source of a market reaction. This statement has the potential to have a significant influence on the markets and mortgage rates as investors look for any indication of what and when the Fed may do next. One potential move would be more debt purchases by the Fed. An announcement of another round of quantitative easing (QE3) could help boost bond prices and improve mortgage rates tomorrow afternoon. Besides that, it is believed that there isn't much more the Fed can do to help boost economic activity.

There is also some optimism that Mr. Bernanke and friends will change their current policy regarding information released to the public. There has been discussion that the Fed is considering being a little more open with their theories and targets for monetary policy. If they do make that change at this meeting, we will hear in the post-meeting statement. Generally speaking, it would probably be received well by the markets as it would allow analysts to better predict future moves based on certain economic conditions. But the truth is, it will do little to improve economic conditions or fuel growth.

Also today is the first of two important Treasury auctions. 10-year Notes are being be sold today, while 30-year Bonds go to sale tomorrow. Today's auction is the more important of the two and will likely influence mortgage rates more. Results of each sale will be posted at 1:00 PM ET. If they are met with a strong demand from investors, particularly international buyers, we should see afternoon strength in bonds and improvements to mortgage pricing. On the other hand, a weak interest in the auctions could lead to upward revisions to mortgage rates during afternoon hours.

We will address the auction's results in this afternoon's update top this report shortly after the markets have an opportunity to react to the post-FOMC meeting statement. There is no relevant economic data scheduled for release tomorrow, so the stock markets will likely influence bond trading and mortgage rates.