At the Federal Open Market Committee Meeting last week, the Fed came about as close as it could to assessing the near future of the nation’s economy as declining by stating “The pace of recovery is likely to be more modest in the near term than had been anticipated.”  During the meeting, the Fed indicated that it will continue buying treasuries, using pay downs on the $1.25 trillion of mortgage backed securities it has on its books from last year.  This initiative illustrates the Fed’s position that lower rates will help to stop the economic slide.  Skeptics maintain that until consumers are confident that their jobs are secure and the housing sector improves, lower rates will not be enough.

The bond and mortgage markets opened stronger this morning while US stock indexes and global markets opened weaker.  In the last few weeks it appears that investors have realized that despite Washington painting a picture that the economy is in recovery, the world economy is not in good shape.  This has caused investors to move into the safety of long-term treasuries and in turn caused mortgage rates to fall even lower.  Mortgages opened up .25 basis points from Friday’s close while the DJIA traded down about 13 points at 10:30 this morning.  At 8:30 this morning, the August NY Empire State Manufacturing data hit with the overall index increasing to 7.0 from 5.08 in July.  The new orders component took a hit and went negative for the first time in a while to -2.71 from +10.13, the employment component was better at 14.29 from 7.94 and prices paid for materials decreased due to price declines in commodities.  The National Association of Home Builders housing index came in at 13 down from 14 in July.  This may imply that housing starts which are expected to but up over 1% could actually come in lower tomorrow.  Its becoming very clear that until the housing sector begins some sort of recovers, the US economy will continue to struggle.

Other data due out this week includes July housing starts and permites, PPI, Industrial Production and Capital Uilization Tuesday.  Mortgage Bankers Association weekly mortgage applications come out on Wednesday.  Weekly Jobless Claims, July Leading Economic Indicators, and August Philadelphia Fed Business Index are all due out Thursday.

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