Update #3/ week of June 14, 2010

Good Morning Everyone and Happy Wednesday! Equity markets rallied yesterday like there was no tomorrow. We discussed yesterday morning at this time, that absent a derailment like some big announcement from Greece or something, this rally seemed to have some steam and could finish the day in positive territory. Boy did it! The Dow finished the day up over 200 points, and the good news is, credit markets didn’t over react on the news. In fact, the 10 year note this morning is right where it was on Monday morning and pricing, although worse than yesterday, is pretty much right back where were at the beginning of the week.

Today, the markets seem to be taking a bit of a breather, although early morning losses have been wiped away and we are pretty much right at the flat line for the day. So, we have to cheer the equities that they put on quite a show yesterday, powering through their 200 day moving averages, and are able to hold on to those gains today.

This morning’s economic news presents a mixed bag for the economy. First of all, the PPI fell a seasonally adjusted .3% in May according to the Labor Dept. This should be good news, in that when producers show a drop in prices it usually carries through to lower prices for the consumer 4 to 6 months down the road. Analysts, however, were looking for a drop of .6%, so it comes as a bit of a disappointment. Also, the Core PPI came in with an increase of .2% when the experts were looking for a rise of .1% -- shows how much influence gas and energy prices stabilizing in May held inflation in check. Producer’s Prices, however, are up 5.3% from last May – the biggest jump since Sept of 2009.

With inflation seemingly under control, we turn our attention to the more headline news of the housing industry. Traders were disappointed to hear this morning that housing starts fell 10% to a seasonally adjusted annual rate of 593K homes in May. This represents the lowest level, according to the Commerce Dept, since December. Some would have thought that warmer weather and Summer Sun would have helped housing starts, but apparently this is not the case. Building permits fell last month, too, for a second month in a row. Starts of SFR’s dropped 17%, the lowest in a year. Nobody wants to hear bad news in the housing sector, but there just aren’t enough buyers available out there for which these builders to want to build homes.

This not so happy housing news is helping to keep credit markets in positive territory today after not losing much ground yesterday. Pricing is good today considering everything going on. We’ve had 100 point swings on the Dow the first 2 days of the week, we’ll see how today finishes up. Speaking of today, I will be here in the office all day today. Call me here or email me with any loan scenario or pricing questions . . . and have a terrific Humpday!