New home sales better then expected

Yesterday we saw a little bit of positive strength in the New Home Sales Number beating analyst estimates by about 5,000, which should bode well for economic momentum. For the second month in a row, the University of Michigan's Consumer Sentiment Survey has missed its mark, coming in at 80.9.  Normally, this could be good information for bonds and not so great for stocks. However, the stock market is positive today because Microsoft came out with strong earnings late yesterday, and because Countrywide stated that they will be profitable in the fourth quarter and expect the same results in 2008.

Looking to those ever present energy concerns, oil briefly rose above $92 a barrel this morning in trading.  This comes on the news that the US will be implementing new sanctions against Iran in the belief that the country is supporting Shiite militants in Iraq.   This is not only an issue from a fundamental cost stand point, but also from a psychological one.  Peaking above $90 a barrel makes $100 seem much closer.

The FNMA 30-year 6.0% is currently down about 3bp on the day and unfortunately we never broke through that resistance level of 101.06. Due to the slow economic news week, we tend to see trading based on more technical factors. The FNMA 30-year 6.5% is also down around 3bp.