What was expected to be a pretty quiet week has opened quite volatile.
The markets were closed yesterday in observance of the Martin Luther
King holiday, but international markets were open. The U.S. stock
markets were expected to open weak this morning due to the losses
overseas. The Federal Reserve jumped in and announced a .75 of a point
cut to key short-term interest rates, obviously in an effort to minimize
this morning's selling. Whether it helped or not is yet to be
determined, but the bond market has benefited as investors look for
safety from the volatility. The result is bond strength and stock
weakness this morning.

It will be very interesting to see if this is a one or two day spot of
weakness in stocks or if this is the beginning of a downward trend. The
latter is better for bonds and mortgage rates because we will likely see
more flight-to-quality as investors move funds into bonds. This would
drive bonds higher and mortgage rates lower. However, if the markets are
able to stabilize tomorrow or Wednesday, we could see those funds move
back out of bonds, leading to mortgage rates increases. The next day or
so will tell us a lot.

Alex Margulis
Private Mortgage Banker
Perl Mortgage
2936 W Belmont Ave
Chicago, IL 60618
847 529-8100 cell
312 651-5352 office
312 651-5372 fax
alex@perlmortgage.com
www.amargulis.com