April 20th, 2011 7:29 AM by Lehel S.
So much for outlook that markets would likely be quiet this week; after markets closed yesterday more earnings were reported and were better than expected for Intel and Intel's guidance that the outlook is for better earnings going forward. Intel said yesterday revenue may top analysts’ estimates in the second quarter. United Technologies also reported better than expected earnings and forward guidance. Recent reported Q1 earnings had been generally disappointing; a number of estimates for Q1 growth have been lowered. The stock market looked vulnerable until late yesterday. This morning in pre-market trading at 8:30 the DJIA futures +147 and increasing. The bond and mortgage markets are weaker this morning on the better equity market outlook today. At 8:30 the 10 yr note off 7/32 and mortgage prices off 7/32 (.22 bp).
Earlier this morning the weekly MBA mortgage applications. Mortgage applications increased 5.3% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 15, 2011. The Refinance Index increased 2.7% from the previous week. The seasonally adjusted Purchase Index increased 10.0% to its highest level since December 3, 2010, driven largely by a 17.6% increase in Government purchase applications. The unadjusted Purchase Index increased 10.9% compared with the previous week and was 11.4% lower than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is down 2.9%. The four week moving average is up 2.5% for the seasonally adjusted Purchase Index, while this average is down 5.7% for the Refinance Index. The refinance share of mortgage activity decreased to 58.5% of total applications from 60.3% the previous week. This is the lowest refinance share since May 7, 2010. The adjustable-rate mortgage (ARM) share of activity increased to 6.5% from 5.9% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.83% from 4.98%, with points increasing to 1.07 from 0.93 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.07% from 4.17%, with points decreasing to 1.02 from 1.22 (including the origination fee) for 80% loans.
At 9:30 the DJIA opened +160, 10 yr improved to -4/32 and mortgage prices off just 2/32 (.06 bp)after being down 7/32 (.22 bp) at 9:00. Lenders that priced at 9:15 or earlier likely priced at the low, since then prices have improved somewhat.
At 10:00, the only economic data today; Mar existing home sales were expected to have increased 2.5%, sales increased 3.7% to 5.10 mil, estimates were for 5.0 mil. Based on sales there is an 8.4 month supply down from 8.5 months in Feb. The median sales price $159,600.00 down 5.9% frm March last year. There was no market reaction to the report as it is generally in line with estimates and still very weak.
The best open for the stock market in weeks on the strong earnings on tech stocks and forward guidance better than analysts had expected. The economic outlook remains uncertain; recently there have been a number of estimates lowering the growth for Q! that we will get the first look at next Thursday. The IMF went from +2.0% to +1.5% while private estimates also lower but from better levels. Technically the rate markets are slightly bullish for the very near term but the wider perspective both technically and fundamentally remains bearish for interest rates. While the outlook isn't favorable for the bond market, there is little reason currently to expect rates to increase substantially.