Morgage Update: Stocks and Bonds

The recent euphoria in the Stock market continues, and the word in the trading pits is that perhaps the credit crunch is over. Today, we are hearing about more financial institutions raising capital, and this time it is Washington Mutual saying that it has investors injecting $5 Billion in cash. Traders are reading the recent investments and capital raising in the financial sector as a sign that the worst days of the credit crisis may be in the rear view mirror. As a result, Stocks overall are trading higher, and as money flows out of Bonds and into Stocks, this is hurting Bond prices a bit this morning.

Today kicks off the beginning of earnings season for Stocks, which may have the potential to add to the euphoria or change the mood to a negative one depending on the results. With the scent of recession in the air, the quality of corporate earnings and especially future guidance will largely influence the direction of both Stocks and Bonds in the coming days. If corporate earnings are reported weaker than expected, Stocks may come off the happy gas and head lower, which would provide a boost to Bonds.

Mortgage Bonds, while trading lower, are improved from the worst levels seen earlier in the day. Additionally, prices remain well above support at the 50-day Moving Average. For now, we will continue to Float and give Bonds a chance to further improve - but be ready to Lock your mortgage rate if things turn sour.