Mortgage Rates End Week Higher

by Victor Burek - Oct. 16th 2009 10:23am

Mortgage rates moved slightly higher yesterday but managed to weather the storm of better than expected economic data and earnings reports. Today, mortgage-backed security prices are mostly unchanged and mortgage rates are a few basis points lower. However, compared to last week mortgage rates are about 0.25% higher.

Bank of America and GE released earnings this morning. Bank of America had disappointing results last quarter with a larger than expected loss. GE beat estimates on earnings per share but failed to match total revenue expectations. The weaker than expected results moved stock futures much lower which helped the bond market avoid a continuation of recent selling.

The Federal Reserve released Industrial Production data today. This report gives us a look at how much factories, mines and utilities are producing. Last month’s report indicated a large increase, this month economists expected an increase of 0.2%. The report showed that Industrial Production improved more than expected last month, increasing 0.7%. Additionally, last month’s numbers were revised higher from a gain of 0.8% to a gain of 1.2%!

The final economic report of the week is a preliminary read on how the consumer is feeling. The University of Michigan’s Consumer Survey Center questions 500 households each month on their personal financial condition and attitudes about the economy. An optimistic consumer is much more likely to spend money while a pessimistic consumer is more likely to save. Since our economy is driven by consumer spending, the stock market usually benefits with optimism while the bond market benefits with pessimism. Today's preliminary read indicates consumers are losing some of the optimism they gained over the last few months. Expectations called for a 74.0 reading following last month’s 73.5, but the actual report indicated a much worse than expected 69.4