Needham Real Estate

U.S. Treasury securities restored their equilibrium on Monday after a wild ride last week brought about by China's decision to let its currency -- the yuan -- 'float' against a 'basket of currencies' rather than tying it to the dollar. Treasuries sold off out of fear that the Chinese would cool their buying of government debt. Today, however, traders adopted a 'wait-and-see' attitude about China and the effect its decision will have on Treasuries and about the wealth of economic news coming in this week. Monday's report on Existing Home Sales (EHS) for June put some pressure on Treasuries, sending prices down and yields, which move in the opposite direction of prices, up. However, the increase was not strong enough to have much effect on mortgage rates, which held close to last Friday's levels.

EHS made their biggest one-month surge in 25 years, climbing to a whopping annual rate of 7.33 million units. This far outpaced analysts' estimates of 7.13 million units, which coincidentally was the upwardly revised number from May. Sales were up across the country, with the West and Northeast seeing the sharpest rises -5.5 percent and 3.4 percent, respectively. Sales rose 1.9 percent in the Midwest and 1.1 percent in the South. In addition, the National Association of Realtors, which releases the data, said the median price of a house sold in the U.S. was at a record $219,000, up 14.7 percent from one year ago. The sale of condominiums also was stronger than expected. These data boosted Wall Street, as it gave those fearing a 'housing bubble' another month's respite.

Stocks Move to the Upside, Then Fall

Buoyed by the upbeat report on existing homes, which account for roughly 85 percent of all home sales, a slide in oil prices and strong corporate earnings, stocks posted good gains early in the session. But when oil prices reversed course and headed up, stocks headed down, and closed at their lowest levels of the session. There is some nervousness about upcoming economic data, and especially second-quarter Gross Domestic Product (GDP), which will be out Thursday. In addition, 30 percent of the S&P 500 are releasing earnings this week, making investors reluctant to make prior moves.

Only five of the Dow Jones Industrials closed in positive territory and none gained close to 1 percent. Even good earnings by American Express couldn't pull it into positive territory, although it only lost 1 cent. Of the 25 Dow components that closed down, six fell more than 1 percent, with Johnson & Johnson and United Technologies -- the biggest losers -- dropping1.5 percent and 1.4 percent, respectively. Outside of the Dow there were a couple of noteworthy gains. Barron's this weekend said Motorola shares could climb 25 percent, sending it stock today up 3 percent. Maytag added 6 percent on news that it is mulling a sweetened offer from Whirlpool.

Losses on the Nasdaq composite were a bit sharper. Only Yahoo!, which gained almost 1 percent, and Microsoft, which was up 4 cents, were the only two tech bellwethers to close in positive territory. But Cisco Systems was the only one to post a significant loss -- down 2.4 percent.

At closing: The Dow 30 Industrial Index fell 54.70 points or 0.51 percent to10,596.48; the Nasdaq Composite index was down 13.00 points or 0.60 percent at 2,166.74, and the benchmark Standard & Poor's 500 Index lost 4.65 points or 0.38 percent to close at 1,229.03.

The 30-year Treasury bond was down 13/32 in price with the yield rising to 4.46 percent versus 4.44 percent at Friday's close.

The 10-year Treasury note was down 8/32 in price with the yield rising to 4.25 percent versus 4.22 percent at Friday's close.

The 5-year Treasury note was down 5/32 in price with the yield rising to 4.06 percent versus 3.91 percent at Friday's close.

AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year Conventional Fixed-Rate Mortgage was unchanged at 5.561 percent from Friday's close.

The 15-year Conventional Fixed-Rate Mortgage was at 5.128 percent from 5.142 percent at Friday's close.

Coming Up

The Conference Board's report on consumer confidence for July will be released on Tuesday. This is a market-mover because analysts tend to believe that a confident consumer will spend, thereby moving the economy forward. Analysts are forecasting confidence will rise to 106.4, which would be slightly higher than the 105.8 posted in June. Releases on tap for Wednesday include Durable Goods Orders for June, New Home Sales for the same period, and the release of the Fed's beige book, which looks at economic conditions in the nation's 12 federal districts. Treasuries are generally sensitive to the Consumer Confidence report, so a big increase could foster selling. However, overnight and into tomorrow mortgage rates should hold fairly steady.

Carolyn Siegel

carolyn@interest.com

Source: Interest.com All rights reserved. Copyright Interest.com