Mortgage - Interest.com

Mortgage rates unmoved

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U.S. Treasury securities gave back some of yesterday's gains on Wednesday thanks to an unexpectedly strong report on manufacturing activity. Bond traders took this report as a signal that the Fed might have to be aggressive with rate hikes if it is to keep economic growth under control and free from inflationary pressure. Selling in Treasuries sent prices down and yields, which move in the opposite direction of prices, slightly up. The uptick in yields, which are used as a guide to set mortgage rates, was not strong enough to influence lenders to make rate changes.

Treasuries opened to the downside and slipped further when the Federal Reserve's New York Empire State index on March manufacturing conditions came out. The index shot up to 31.2 -- the highest level since July 2004 - when pundits were expecting it to edge down to 19 from the previous reading of 20.3. The report - important because of the freshness of the data - was almost perfect if you were looking for growth. New orders and employment made substantial gains, and prospects for future business conditions were also on the plus side. 'Prices paid' - an indication of future inflation - fell.

Capital flows for January also disappointed bond traders, as the report showed only $4.4 billion was invested in U.S. Treasuries by foreign investors. This is far less than the $18.3 billion spent in December. It was also noted that the total capital flow of $66 billion (which includes the purchase of stocks as well as bonds) was less than the trade deficit. Some analysts argued that this was old data and had no real effect on today's market activities.

Equities build on Tuesday gains

Wall Street roared ahead on Wednesday, posting another round of big gains that sent the Standard & Poor's 500 index to its first close above 1300, since May 2001. Stocks got a bit of a boost from the Empire State index, and they were also bolstered by the Fed's so-called beige book, which reported good economic growth in the nation's 12 Federal Reserve Bank districts. Business spending and hiring were up across the board, while housing activity was mixed due to geographical differences. A welcome drop in oil prices, due to higher-than-expected inventories, added to the upbeat outlook. Oil fell 95 cents to $62.15 a barrel.

The Dow Jones industrials closed at their highest level in almost five years, with two-thirds of the components landing in positive territory. Caterpillar topped the list with a 3.3 percent gain, followed by DuPont, which added 2.3 percent after upping its first-quarter and full-year earnings forecasts. Others reaping sizable gains included GE, which was up 1.9 percent, GM, which gained 1.7 percent and Hewlett-Packard and McDonald's, which each rose 1.5 percent.

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