Week in review

• Third quarter GDP increased a little to a 2.0% annual rate
• Weekly Jobless Claims declined to the lowest level in three months
• September Durable Orders posted the biggest increase since January
• The G20 nations will try to maintain trade balances at "sustainable" levels

The Commerce Department reported earlier this morning that sales of new homes rose in September by 6.6% to an annual rate of 307,000 as compared to the prior month. Even with this month's gain, the pace of sales is barely above its 47-year low. Slow job growth, tight credit, and low consumer confidence remain the primary impediments to improvement in the housing sector.

Mortgage rates are up .25% for the week.

Rates are up

September Existing Home Sales rose 10% from August to an annual rate of 4.53 million, above the consensus forecast of 4.25 million. Inventories of unsold existing homes fell 2% to a 10.7-month supply. First-time buyers purchased 32% of homes. Distressed homes accounted for 35% of sales. The September data was encouraging, but investors are concerned that recent issues with foreclosures will lead to a decline in the October figures.

Week in review

• Sept. Capacity Utilization posted the first monthly decline since June 2009
• The Fed's Beige Book revealed modest economic growth in most regions
• China unexpectedly raised interest rates for the first time in nearly three years
• The Treasury will auction $99 billion in 2-yr, 5-yr, and 7-yr securities next week

This morning, weekly Jobless Claims fell to 452K, close to the consensus forecast of 455K. The four-week average declined to 458K. The Dow is up 50 points. Rates will tick up today on this news.

After booming for more than a year, the manufacturing sector of the economy is starting to show signs of cooling off from its red-hot growth pace. Industrial production fell 0.2% in September - marking its biggest decline since June 2009. This should help keep rates down.

A speech by Fed Chief Bernanke and a big release of economic data has produced a volatile morning so far. Bernanke's speech contained few surprises, but it confirmed the expectation that the Fed will provide additional monetary stimulus soon by purchasing Treasury securities. The Fed's purpose is to boost the economy and to bring the inflation level up to the Fed's preferred rate. According to Bernanke, "There would appear - all else being equal - to be a case for further action." Investors hoping for more information about the size of the purchase program were disappointed, as Bernanke stated that it is still being discussed by Fed officials.

Today's economic date came in close to expectations and had little impact on rates. The results from the 30yr Treasury auctions could move the market.

Rates are up today due to a rally in the stock market - Dow is up 50. Import prices excluding oil rose 0.3%.

Weakness in the stock market has helped mortgage rates this morning. The DOW is down 50 points. The FOMC minutes from the September's meeting along with the results of today's 3 yr Treasury auction results could change the direction of rates.

Jobs Report Misses

Rates are lower today after the release of weaker than expected Employment data. Against a consensus forecast for as loss of 5k jobs, the economy lost 95k jobs in September.

This morning, weekly Jobless Claims dropped to 445K, below the consensus forecast of 455K, and the lowest level since July 10. The four-week average, a less volatile measure, fell to 456K. The Dow is up 10 points. No more economic data will be released today.

This morning, the ADP private payrolls firm's estimate for Friday's Employment data forecasted a loss of 39K private sector jobs in September, below the consensus for an increase of 20K, and the first decline since January. The Dow is down 10 points. No economic data will be released today.

Overnight, the Bank of Japan (BOJ) unexpectedly cut interest rates nearly to zero and announced a new $418 billion monetary easing program to boost the economy. The BOJ also launched a $60 billion fund to purchase Japanese fixed income assets. Global bonds rallied after the news. This news has caused mortgage rates to creep up from yesterday.

August Pending Home Sales rose 4.3% from July, which was stronger than expected, but they were down 20% from one year ago. Pending Home Sales are a leading indicator for the housing market. August Factory Orders declined 0.5%, matching the consensus forecast. The Dow is down 80 points. Fed Chief Bernanke will be speaking tonight.

It has been a quiet morning so far. August Personal Income increased 0.5%, above the consensus forecast of 0.3%. The Core PCE price index rose 0.1% from July, matching expectations, and was a tame 1.4% higher than one year ago. The Fed's Dudley stated that further Fed action to stimulate the economy is "likely to be warranted" unless the economy improves quickly.