Market Forecast Week of December 1, 2008

Well its official!!!

The current Recession officially started December 2007. According to the National Bureau of Economic Research the expansion period which started November 2001 official peaked December 2007.

Last week Government action fueled a mortgage market rally, leading mortgage rates lower for the second consecutive week.
•    Citigroup was “rescued”
•    Wall Street liked the new economic team
•    The government pledged $600 billion to buy investment-grade mortgage bonds

These 3 elements helped drive mortgage rates to their lowest levels since January 2008 — in some cases shaving a full percentage point off the offered rate.

This week; 5 members of the Fed will make public appearances, including Fed Chairman Ben Bernanke.  With the Fed’s next meeting scheduled for December 15, markets will be looking for clues about how the Fed may change the Fed Funds Rate.

Speculation is a reduction to 0% Feds Funds Rate, although .50% is more likely.

When the Fed Funds Rate falls, mortgage rates tend to rise on the news.

Then, on Thursday, retailers start announcing their “same store” sales figures for November.  This will clue us in to the true health of the economy because consumer spending accounts for two-thirds of it.  If same-store sales are dramatically lower, expect calls for a large Fed Funds Rate cut.

And lastly, Friday brings us the jobs report.  As terrible as the employment reports have been this year, it will take an especially higher number of jobs lost in November, or an exceedingly high Unemployment Rate to have much of an impact on mortgage rates.

This month, weak jobs data should be harmful to mortgage rates because more out-of-work Americans may lead to more mortgage defaults nationwide, plus additional Fed Funds Rate cuts.

Economic Calendar for the Week of December 01 – December 05

Date ET Economic Report For Estimate Actual Prior Impact Mon. December 01 10:00 ISM Index Nov 38.0 38.9 HIGH Wed. December 03 08:15 ADP National Employment Report Nov -173K -157K HIGH Wed. December 03 10:00 ISM Services Index Nov 42.6 44.4 Moderate Wed. December 03 02:00 Beige Book Moderate Thu. December 04 08:30 Jobless Claims (Initial) 11/29 NA NA Moderate Fri. December 05 08:30 Average Work Week Nov 33.6 33.6 HIGH Fri. December 05 08:30 Hourly Earnings Nov 0.2% 0.2% HIGH Fri. December 05 08:30 Non-farm Payrolls Nov -300K -240K HIGH Fri. December 05 08:30 Unemployment Rate Nov 6.8% 6.5% HIGH

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