The Fed to Raise rates… ooohhhmmm… NO
The housing data was without a doubt good. 2 days in a row good housing data came out suggesting a recovery in housing. Was housing really bad… imo… no, but was it a drain on GDP… yes. Does a recovery in housing change the opinion of the Fed, i do not think it does. The reason is because pricing still DECLINED. As such the housing recovery right now does not affect inflation. Again, PRICING DECLINED.
Housing may not strain GDP, as it is currently doing, but it will not push up inflation, so the Fed will not act on it. The Fed has been very clear that it will not cut rates, but for whatever reason CNBC keeps saying they were planning on cutting.
What I did like about today, imo it very positive for financials, is the break out in the 10yr yeild. The 10yr is pushing up to where it should be going (the fed fund target). This is causing the flattening of the yeild curve, and it just may go back to a rightward sloping curve. (good stock plays for this are COF and AIG… take advantage of the weakness)
Also, get out of housing stocks now. The low 10yr has kepted mortgage rates very low, but now mortgage rates should start to rise w/the 10yr. This will cause a greater strain on housing purchases (due to the higher mortgage cost), and keep the housing sector flat to negative.
