Brookline Condominiums

Traders in U.S. Treasury securities accepted the fact that China's revaluation of the yuan last week will have limited impact on that country's buying of government debt. With this worry out of the way, Treasuries attracted light buying on Tuesday, but expected economic growth and upcoming rate hikes have dampened enthusiasm for these fixed-rate assets. Slow to moderate buying sent Treasury prices edging up and yields, which move in the opposite direction of prices, creeping down. The effect on mortgage rates, which are based on Treasury yields, was negligible. The interest rate on the 30-year fixed rate has been bobbing between 5.5 percent and 5.625 percent for the last few days, while the rate on the 15-year fixed moved up to 5.125 percent and has held there. Rates on one-, three-, and five-year adjustable-rate mortgages have also climbed in the past week or so, but are now relatively stable. A weaker-than-expected Consumer Confidence report for July gave Treasuries a little boost and threw a wet blanket over Wall Street. The index fell to 103.2 from 105.8 in June, and was way off forecasts for an increase to 106.8. Both categories - present situation and future expectations - were down, with respondents particularly concerned about one's ability to get a job.

DuPont, Confidence Weigh on Dow

DuPont was almost single-handedly responsible for the loss on the Dow Jones Industrials today. Although the chemical giant showed earnings that were up from one year ago, it missed estimates by a whopping 6 cents a share. DuPont led the 16 components that closed in negative territory with a 6.6 percent slide. Other losses were minimal, with Johnson & Johnson the only other component to shed more than 1 percent. Dow component Verizon missed earnings estimates by 1 cent, but punishment was not as severe. GM led the Dow with a 3 percent gain, followed by Home Depot and Intel, which each added 1.4 percent.

Texas Instruments, which trades on the NYSE but is not in the Dow 30, offered nothing but good news. The chip maker beat earnings forecasts, provided upbeat guidance and increased it dividends. This report had a positive effect on the Nasdaq, chips and the tech sector in general. The Nasdaq composite traded in positive territory from open to close. Of the tech bellwethers there were two companies to post gains of more than 1 percent -- Intel and Cisco Systems. JDS Uniphase led in declines, dropping 3.6 percent and Ericsson fell 1.2 percent -- the only two with substantial losses.

Thus far earnings season has contained more good news than bad. In fact, of the 220 members of the S&P 500 that have reported so far, 80 percent have met or beat expectations, which bodes well for the economy.

At closing: The Dow 30 Industrial Index fell 16.17 points or 0.16 percent to10,579.77; the Nasdaq Composite index was up 9.25 points or 0.43 percent at 2,175.99, and the benchmark Standard & Poor's 500 Index gained 2.13 points or 0.17 percent to close at 1,231.16.

The 30-year Treasury bond was up 9/32 in price with the yield falling to 4.45 percent versus 4.46 percent at Monday's close.

The 10-year Treasury note was up 6/32 in price with the yield falling to 4.23 percent versus 4.25 percent at Monday's close.

The 5-year Treasury note was up 2/32 in price with the yield falling to 4.05 percent versus 4.06 percent at Monday's close.

AVERAGE mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year Conventional Fixed-Rate Mortgage was unchanged at 5.579 percent from 5.561 percent at Monday's close.

The 15-year Conventional Fixed-Rate Mortgage was at 5.149 percent from 5.128 percent at Monday's close.

Coming Up

Durable Goods Orders for June - big-ticket items meant to last three or more years - will be released prior to the opening bell on Wednesday. This report can be influential as it indicates willingness to spend by both businesses and consumers. Durable goods include a wide scope of products; anything from furniture, appliances and electronics to autos and aircraft. Analysts are expecting orders for durables to come in at a negative 0.5 percent - a big decline from the 5.5 percent increase posted in May. This number, however, was largely due to strong orders for aircraft.

Also on tap is New Home Sales for June, which are expected to hold close to May levels. Analysts expect sales of new homes to come in at an annual rate of 1.29 million units, which is just shy of the 1.3 million posted the previous month. The Federal Reserve will release its beige book, which looks at economic conditions in the nation's 12 federal districts. This report is of special interest to bond traders, who comb it for hints of inflation and signs of strong economic growth -- both negatives for Treasuries. If the reports come in as expected, Treasury yields should hold along with mortgage rates.

Carolyn Siegel

carolyn@interest.com

Source: Interest.com All rights reserved. Copyright Interest.com