Markets Dance Around Mixed News

In This Issue

Last Week in Review: There was a mix of good and bad economic news last week, but how did Bonds and home loan rates react? Forecast for the Week: The second half of the week heats up, with important housing and manufacturing news. View: Social media is a big part of success today, and Twitter is one of the biggest sites around. Be sure to check out the great tips below.

Last Week in Review

They say it takes two to tango.... And Stocks and Bonds have been tangoing for investment dollars, as the economic reports continue to deliver mixed results. Read on for details. Several reports last week delivered good news for our economy. The headline Retail Sales number came in at 0.8%, much higher than expectations. Building Permits jumped to their highest level in four years and Consumer Sentiment also improved, coming in higher than expectations. In addition, inflation at the consumer level was tame. This is typically a good sign for Bonds, as inflation hurts the value of fixed investments like Bonds...which means tame inflation is also good for home loan rates since they are tied to Mortgage Bonds. It is important to note that the Producer Price Index did show that inflation at the wholesale level was higher than expectations. However, not all the news was rosy for our economy. Despite the improvement in Building Permits, Housing Starts came in worse than expected. There was also negative news on the manufacturing front, from both the Philadelphia Fed Index and the Empire Manufacturing Index, the latter being reported at a dismal -5.85 versus the 5.0 expected. This was the first contraction in the Index in nine months. So how did all of this news impact Bonds and home loan rates? Typically, if the economic reports are good, Stocks go higher because the economy is improving. Meanwhile, weak economic news usually helps Bonds and home loan rates, as investors move their money out of Stocks and into safer investments like Bonds. But recently, Stocks have been improving even when there is weak economic news, as negative news gives the Fed cause to provide additional stimulus for the economy (known as Quantitative Easing, or QE3). However, there are still many factors that should help Bonds and home loan rates remain near their historic best levels. Many experts believe we are in or near a recession, plus there is continued uncertainty out of Europe. This will likely add to the safe haven trade into our Bond market, helping home loan rates in the process. The bottom line is that home loan rates remain near historic lows and now is a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week

Chart: Fannie Mae 3.0% Mortgage Bond (Friday Aug 17, 2012) Housing and manufacturing news will be front and center in this week’s economic reports: Existing Home Sales and New Home Sales will be released on Wednesday and Thursday, respectively. Initial Jobless Claims will be released on Thursday as usual. Last week’s data came in slightly below expectations, which helped bring the average over the past month to the lowest level since late March. However, the number was still too high, and it remains a stark reminder that the US economy isn’t out of the woods yet. Finally, this week rounds out with manufacturing news in the form of the Durable Goods Orders Report on Friday. Durable Goods Orders are considered a leading indicator of manufacturing activity. So the markets will be watching this report, especially after last week’s Philadelphia Fed Index and Empire State Index readings. In addition to those economic reports, the Meeting Minutes from the latest Federal Open Market Committee (FOMC) meeting will be released on Tuesday. This report is sure to garner some attention—not only because it kicks off the week’s news, but also because the markets are looking for any insight as to whether the Fed will come through with another round of Quantitative Easing (or QE3). Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on. When you see these Bond prices moving higher, it means home loan rates are improving — and when they are moving lower, home loan rates are getting worse. To go one step further — a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning. As you can see in the chart below, Bonds and home loan rates have moved away from some of their best levels but they are still near historic lows. I’ll be watching closely to see what happens this week.

The Mortgage Market Guide View...

Get More Retweets Starting Today If you use social media sites like Twitter, you know that one of the best ways to spread your message is to create a message that other people will actually spread for you. The question is: How do you do that? Chris Sturk of Mequoda recently published a post on the top ways to get more retweets. You can read the entire post for more details, but here are a few important highlights: Use “retweet” rather than “RT”—studies have shown that “retweet” is 23% more likely to work. Don’t use more than three hashtags per tweet—if you use more, your tweets may not be retweeted because they look like spam. Tweet during active times of the day (from 8 am to 7 pm)—be sure to factor in time zones that you’re targeting if you have a national or global strategy. Those are just three of the tips that Sturk offers, but they’re three tips that can help increase your retweets without completely reworking your social media strategy. Economic Calendar for the Week of August 20 - August 24 Date ET Economic Report For Estimate Actual Prior Impact Tue. August 21 02:00 FOMC Minutes 7/31 Moderate Wed. August 22 10:00 Existing Home Sales July NA NA 4.37M Moderate Thu. August 23 08:30 Jobless Claims (Initial) 8/18 NA NA NA Moderate Thu. August 23 10:00 New Home Sales July NA NA 350K Moderate Fri. August 24 08:30 Durable Goods Orders July NA NA 1.3% Moderate

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