October 27th, 2008 8:52 PM

This week's Economic calendar. Should I lock, or Should I float?

Via Robert Rauf:

This week's Economic calendar.

The markets are dysfunctional; they are totally unhinged and Economic fundamentals no longer apply. So trying to predict what is going to happen next is impossible, even for the seasoned analyst to figure out what the market will do from one day to the next! This week's calendar is loaded up with quite a bit of information for the markets to digest:

• Monday 10/27: September New home Sales, expected down 2.1%. It wasn't expected to move the market, it did not
• Tuesday 10/28: Day one of the Fed FOMC meeting
• Tuesday 10/28: October Consumer Confidence, Expected to be +52 Vs 59.8 last month. Consumer confidence is expected to be low, so we won't be likely to see any reaction to this news
• Wednesday 10/29: Durable Goods orders, expected -1.1%. This report will clarify the extent of the slow down, the weaker the number the slower things are... and the weaker the number the more likely we will see rates creep lower
• Wednesday 10/28 2pm: FOMC meeting ends, market expects a 50bp cut. The market seems to have priced in a 75% chance of a FED cut. With a 50bp move we will not see any reaction in the markets, but if we see a 75bp move (which some predict) we will probably see a happy market with lower rates. BUT, if the FED stands still the market will show its disappointment with a sell off and higher rates.
• Thursday 10/30: GDP expected -0.5%. If the slowdown in the 3^rd quarter is worse than the estimate, Stocks will sell off, and have an opposite effect than what we would normally expect: a simultaneous sell off in the Credit Markets with expectations of deteriorating employment and weakness in Mortgages... making it difficult for mortgage rates to drop further from current levels
• Thursday: Initial jobless claims for previous week, expected down 3,000. A modest decline will not be a recipe for a market mover.
• Thursday: 3^rd quarter employment cost index. Expected +0.7%. The forecast number is considered modest and not likely to be an inflation threat, so not a market mover.
• Friday 10/31. HAPPY Halloween! And September Personal income, spending , PCE. Expected +0.1%, -0.3% and +0.1%. This report is expected to reflect a strong drop in Consumer Spending and weak income and consumption expenditure. In normal times these numbers would cause a rally and lower rates, but it is hard to say what will happen today.

The Biggie of the week is not on the calendar. Fed Chairman Bernake is making a presentation at a symposium on the Mortgage Meltdown, The Economy, and Public Policy. It is his opportunity to calm the nerves of the credit markets and help return some liquidity to the markets in the form of more confident investors buying fixed income securities like Mortgage Backed securities.

Well, That's my 2 cents worth for this week! Rates have climbed a bit from the beginning of last week, but the economic data suggests that we should actually see lower rates. As I started off this note, the markets are not acting in a predictable fashion. So Play it safe this week!

Robert Rauf

Real Estate Mortgage Network

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