As expected, Wall Street is off to a weak start this morning as renewed worries about the financial sector are pushing stock prices lower. Bank of America reported a gain for the quarter but the profit was heavily reliant on one-time items. Against this wobbly profit profile the bank also reported a big increase in troubled loans.
That was all many stock traders needed to hear to induce them to sell stocks and park the proceeds in lower risk investment vehicles like Treasury obligations and mortgage-backed securities - a definite positive development for the prospects of steady to perhaps fractionally lower mortgage interest rates.
The mortgage market even got a friendly little unintentional nod from the Conference Board's* leading economic index, which fell by an unexpected 0.3%. This index is designed to forecast economic activity six- to nine-months ahead. Even though the index's accuracy rate is not very good - the March drop in this forward looking economic indicator undoubtedly contributed to stock investors' decision to liquidate existing positions in favor of the relatively safe harbor offered by the bond and mortgage-backed securities market.
This week's round of macro-economic data will likely be largely, if not completely, overshadowed by the torrent of earnings reports due to be released by Corporate America. If it turns out Corporate America doesn't have much to crow about yet -- and their forward looking earnings guidance is either weak or even nonexistent - it is highly likely the selling activity in the stock market that began this morning will accelerate as the week progresses. If the assessment proves accurate, look for market conditions to continue to favor steady to fractionally lower mortgage interest rates.
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