Fed extends operation twist - existing home sales drop
Posted June 21, 2012
The Fed Decision yesterday left the Fed Funds Rate unchanged and extended Operation Twist through the end of the year. The Fed also noted that they are still prepared to take further action if necessary. They expect growth to remain moderate, and indicated that inflation has declined. They also stated that they expect unemployment to decline only slowly over the next few months. Their commitment to low interest rates remains very much intact.
Thursday's weekly jobless claims report showed that jobless claims fell only 2,000 for the week, remaining elevated at 387,000. This flat number continues to support the idea that the labor market is under continued pressure.
According to the National Association of Realtors on Thursday, Existing home sales dropped in May by 1.5%, adding to concerns about a soft economy and overall national struggling housing market. Inventory depletion and fewer borrowers added to the decline in sales.
June's PMI report delivered a reading of 52.9 which is a 10 month low and indicated that manufacturing is continuing to suffer due to tougher economic headwinds. The only silver lining from that report is that the reading stayed above 50, which indicates expanding activity.
Yields digested the negative economic data on Thursday and then headed south, dropping to a yield of 1.60 by mid-day Thursday. Mortgage Rates actually rose slightly Wednesday afternoon after the Fed news, but improved slightly on Thursday once the markets began to digest Thursday's poor economic data reports. Mortgage rates remain very strong.