Much to most economists' surprise the pace of expansion in the service sector of the economy accelerated in August, snapping a three month losing streak.



The Institute of Supply Management said its services index rose to 53.3% in August from 52.7% in July. This index represents about 90% of all domestic economic activity. Today's uptick suggests the recovery is continuing to limp along even in the face of anemic job growth. Mortgage investors took note of the better-than-expected performance for the ISM's Service Sector Index - and then shrugged the whole thing off.



For the time being mortgage investors appear content to tread water as they await Fed Chairman Bernanke's 1:00 p.m. ET speech on Thursday and President Obama's address to a joint session of congress at 7:00 p.m. ET the same day. Until then the mortgage market will probably take directional cues from trading action in the stock markets. Higher stock prices will tend to push mortgage notes fractionally higher while lower stock prices will likely prove supportive of steady to perhaps slightly lower rates.



For what it is worth, some models are indicating the Dow Jones Industrial Average (a price-weighted average of 30 actively traded, primarily blue chip industrial stocks, considered to be an indicator of overall stock market conditions) will attempt to put in a short-term bottom somewhere in a price range between 11,040 to 10,950. This bottom, according to those models, will likely be made sometime between today and the close of business on Friday. If this assessment proves anywhere close to accurate, it will be difficult, if not impossible for mortgage note rates to move significantly lower from current levels. Heads up.