Forecast for the Week 09/16/2008
This week several important economic releases will arrive, and the flavor of these headlines will help determine if things can continue to move in an improving direction. Tuesday's Consumer Price Index (CPI) report will show us inflation at the consumer level - that is, how much more expensive goods and services are for consumers this month over last month. If CPI brings more good news on the inflation front, Bonds and home loan rates may add to their improvements from last week.Also on Tuesday, the Fed will release their latest Policy Statement and Interest Rate Decision. It is widely believed that the Fed will keep the Fed Funds Rate at 2% given the lessening concerns over inflation, but it will be important to see if the Fed's statement gives us a hint as to what their plans are for the near future.Later in the week, we will get a read on the housing market via the Housing Starts and Building Permits Report on Wednesday, as well as a look at the manufacturing sector via the Philadelphia Fed Report on Thursday. This monthly survey of manufacturing purchasing managers conducting business around the tri-state area of Pennsylvania, New Jersey, and Delaware is one of the most highly watched manufacturing reports. If manufacturing appears to be getting stronger in this region, Stocks could move higher at the expense of Bonds and home loan rates.Remember when Bond prices move higher, home loan rates move lower...and vice versa. As you can see in the chart below, Bonds and home loan rates have improved significantly over the past month, but got stopped in their tracks last week by a technical "ceiling of resistance". I will be watching closely to see if Bonds and home loan rates can break this barrier and find more improvement in the weeks ahead. |