Mortgage rates continued their relentless three week climb and are now approaching 6%. While we have been getting better economic news of late, nothing should be causing the sustained and prolonged increase in rates that we are seeing. The market is absolutely desperate for any news other than the depressing, jump out of a window kind. The news we are starting to get could be seen as positive. Or at least, not as bad as last week's news. As a result, investors feel safer putting their money in the stock market than in bonds (which drive interest rates). This is all about investor confidence, which is in short supply right now with respect to bonds. So I think for the short term, we will see rates rise a little more before they rebound and stabilize in the 5.5-5% range for the remainder of the summer. But as I mentioned in April, I think inflationary concerns start to take control in the Fall and rates will again increase and stay "increased". I hope I'm wrong, but there are too many things that could work against rates like a resurgent stock market (better investment opportunity) and continued government spending (inflationary concerns and devaluation of the dollar). For the week, rates increased by an .125 to a .25 in rate.
Thursday offers up a majority of this week's news with Retail Sales, Jobless Claims and Business Inventories numbers being released. Retail Sales numbers have been -1.3% (March) and -.4% (April), so watch for a negative number but notice any improvement from month to month. The point here isn't the actual number, but how the number is interpreted. Perception carries as much weight as reality right now. Same concept with Jobless Claims. Both Initial and Continuing Claims numbers were slightly better than the week before, 4,000 and 15,000, respectively. So that is some "good" news! Until you realize that is 4,000 less initial claims out of 625,000. Or 15,000 less continuing claims out of....6.7 million! Nobody expects firms to start hiring right away, but if new and continuing claims follow a downward trend, this could be interpreted as a sign the recession is bottoming out. And potentially bad for interest rates. Remember: Interest rates do not like good news.