Current Trend Direction: Sideways

Risks favor: Floating

Current Price of FNMA 6.0% Bond: $98.91, +12bp

Mortgage Bonds are trading higher as Stocks look like they are going to be punished today. We have seen how earnings season drives Stock prices, and how Bonds typically move in an opposite direction to Stocks. Today, oil giant Exxon missed earnings expectations even though oil prices are now above $77 a barrel. With Stocks close to all-time highs, the weak earnings report from Exxon gives traders a chance to take profits, and the Stock market is pulling back lower as a result. The good news is that Bonds are the beneficiary, as the money from Stocks sold gets parked over into Bonds, helping pricing improve.

In economic news, the Durable Goods Orders report for June was reported at 1.4%, which was lower than projections of 2.0%. This weak report is also helping Bonds hold their higher ground. The weekly Initial Jobless Claims was reported at 301,000, slightly lower than expectations of 310,000. Overall, the Jobless Claims data suggests the labor market remains stable, with unemployment rates hanging around historical lows of 4.5%.

At 10am ET today, the latest read on the housing sector will be released with the New Home Sales report. Unless this report wildly misses expectations, we shouldn’t see much of a market reaction.

Bonds have freed themselves from the 25-day Moving Average and have now popped above the 40-day MA. With a very negative sentiment in Stocks today, Bonds may continue to benefit. For now, we will continue to Float, and give Bonds a chance to test resistance at the 50-day MA, presently at $99.04.