Monday, October 19, 2009

The coming week doesn't offer much in the way of potentially mortgage market moving economic data. Tuesday's September Housing Starts and Building Permits numbers together with the September Producer Price Index figures will likely draw little more than a passing glance from mortgage investors.

Friday's September Existing Home Sales numbers might generate some upward pressure on mortgage interest rates if it shows a gain of more than 5.0% -- while certainly possible -- such an outcome is not currently considered very probable.


It is highly likely that trading action in the stock markets will exert the strongest influence on the trend trajectory of mortgage interest rates this week. After a 60% run-up in the stock market since March -- and with the DOW again trading above the psychologically important mark of 10,000 - stock market investors are making strong bets that corporate earnings will continue to "surprise" to the high side of expectations.

According to Thomson Reuters data, 61 companies in the S&P 500 have reported third-quarter results by last Friday - and 79% of them beat Wall Street expectations. If the remaining 439 companies who have yet report earnings follow the current pattern -- stock markets will almost certainly continue to rally at the expense of fractionally higher mortgage interest rates. On the other hand, if the remaining companies fail to solidly beat current earnings expectations, their stock will likely being to sell-off. The larger the number of under-performing companies (as compared to analysts' expectations) the stronger the likelihood stock markets will roll-over into a heavy sell-off - a condition that will tend to be strongly supportive of steady to fractionally lower mortgage interest rates.


Well before the end of the month we will know decisively whether stock market trading activity is going to spook mortgage investors into pushing mortgage interest rates higher - or whether a slump in share prices will treat mortgage market participants to another round of fractionally lower mortgage interest rates.

Stay Tuned...