The Weekly Rap! Friday Dec 6, 2012

The Dow is currently trading at 12,553 higher by 556 pts compared with two weeks ago.  That’s a gain of over 1,000 points in just two weeks.  The S&P 500 is also trading higher at 1,414.  Gold is trading at $1,700 an ounce, while oil futures at $86.11 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.33/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, are trading at 1.62%.  30-year Treasury Bond yields are trading at 2.81%.  The MBS (Mortgage Backed Security) FNMA 30-year fixed 3.0% coupon, containing 3.25-3.625% mortgages, pretty much the benchmark or how rate sheets are priced these days, is about 75% of the over-all production.  This security is currently at 105.06 still trading in a tight range.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.

In economic news this week; Most of the economic news that pertains to post-election should have a “fiscal cliff” asterisk next to it due to the fact that the amount of uncertainty surrounding the possible outcomes is weighing on the decisions of just about every company out there no matter what they produce.  If you haven’t heard, the “cliff” is a mix of tax increases and spending cuts set to hit in January unless the White House and Congress strike a deal to avert it.  Going over the cliff would likely send the economy back into a recession, and many economites think businesses are already holding back on hiring and investment while tax rates and government spending plans for next year remain unknown.

Manufacturers slowed production in November with the Institute for Supply Management’s index of purchasing managers falling to the lowest level in more than three years, dropping to 49.5% from 51.7% in October.  Purchasing managers are the executives who buy raw materials and other supplies for their companies, an activity that tracks closely with how fast the economy is growing.  Service companies such as insurers and health-care providers grew at a somewhat faster pace 54.7% in November, marking the 35th straight month of expansion.  A level above 50 indicates expansion.

The U.S. added 146,000 jobs last month as job growth seems to have picked up a bit and the unemployment rate fell to a four-year low 7.7% from 7.9% in November as the labor market shrugged off superstorm Sandy, the latest sign of a steady if unspectacular economic recovery. September’s and October’s increases were cut by a cumulative 49,000. Since the beginning of the year, employment growth has averaged 151,000 a month, about the same as 2011.  The lower unemployment rate, meanwhile, largely reflects people leaving the work force.

Home prices edged 0.2% lower in October, even as the year-on-year change 6.3% higher registered the strongest advance in more than six years. CoreLogic said prices slipped in October, which it says was expected as the housing market enters the offseason.  Excluding distressed sales like foreclosures and short sales, prices actually rose 0.5%, or 5.8% year-on-year.

Consumer sentiment took a large step back in December, as the looming fiscal cliff made its first measurable dent on the public’s psyche. The University of Michigan-Thomson Reuters consumer sentiment index fell to 74.5 from 82.7 in November.

Bill Bartok

Mortgage Advisor

NMLS# 991445

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