Update #2/ Week of July 27, 2009/ Some Deterioration

Good Afternoon Everyone and Happy Tuesday! The stock markets, as expected, are having a difficult time mustering any positive momentum today. Equities have made several attempts to move positively, but each time they have been met with strong selling. With uncertainty in the equity markets, money is already beginning to flow over to safe havens, and credit markets are benefitting. This is what we said was going to happen, but we need whole lot more of this. Look for this trend to continue, though choppy, for the next couple weeks.

This morning’s negative tone actually began last night with the European markets. The major stock markets of Europe were down anywhere from 1% to 2% going into our trading session. The S&P Case/Schiller Home Price Index for May came in this morning at 139.8 in line with expectations. The drop of home prices in the 20 largest metropolitan cities surveyed year over year was 17.1%, slightly better than the 17.9% anticipated. The brutal news this morning that knocked the equity markets for a loop was the July consumer confidence index report. We had seen this index on the rise lately as it appeared people were generally becoming more optimistic about the future of the economy. This morning was a disappointment, though, as the reading came in at 46.6 – below expectations set at 49, and down from the 49.3 number posted in June.

The Feds auctioned off $27 billion worth of 52 week Treasury notes yesterday and were pleased with the demand. Today they’ll auction off another $42 billion worth of 2 year T notes. This is going to compete with money for the MBS’s, but strong demand helps us in the long run.

All of this means cautiously better rates for us. Banks are slow to chase the rates down, although they need to get volume going. Investors will leave a little cushion as they slowly ratchet rates in our direction. Let’s just hope for more help in Treasuries. I’ll be out in the field all day today making sales calls. If you need me, catch me on my cell phone, or email me. I’ll be back in the office tomorrow. Have a terrific Tuesday!