Last Week; was another volatile one in the financial markets. The overriding factor is what's up with the US and global economic outlook? For all the talk and forecasts there is still no real consensus about the impact of sovereign debt problems in Europe and the possible negative impact on growth in Europe and in the US. The Asian economies, based the most recent data out of China and Japan are improving, in Europe the outlook remains cloudy with the banks in the region facing potential debt defaults from a number of countries. Last week however, some of the fear that Europe's problems would drag the US back into recession dissipated leading to a good week for equities based on the key indexes. The DJIA jumped 279 points, the NASDAQ +24 and the S&P 500 +27. The mortgage market whipped around all week and ended about unchanged on the week; the 10 yr treasury note yield also about flat (+2 bp to 3.23%).
This week; will likely be another choppy one with the stock market opening better on Monday. The market volatility should continue with not much in the way of significant economic releases. May housing starts are expected to be weaker while building permits should improve a little. Weekly unemployment claims will continue at 450K new unemployment claims filed; 2+ million a month initiating unemployment claims. Some talk in Washington that the home buyers tax credit will be extended past the end of this month as getting loans closed to beat the deadline is taking longer to close. Those that signed their contracts by the end of April should be allowed the time it takes to close. There are no Treasury auctions this week, on Thursday Treasury will officially announce next week's auctions----about $112B in 3 auctions. The interest rate markets this week will continue to be driven by how the stock market trades; stocks rally, bond and mortgage prices decline, stocks sell bond and mortgage prices improve----nothing new. One key to US stock market direction is how the euro currency trades, if the euro gains some strength the stock market will likely improve.
