Market Focus

[Adam in CO]

Thursday, February 16, 2006 - 3:35 pm MST

Housing starts surged 14.5% in January to a seasonally adjusted annual pace of 2.276 million units. Unseasonably warm weather in most parts of the country last month produced the lift in construction starts which would have otherwise eased under softer housing fundamentals like rising rates, slower sales and higher inventories. New construction starts were strong across the country with significant gains in all regions. Single family starts jumped 12.8% to 1.82 million while multifamily starts increased 21.9% to 457k. That is a new higher range for multifamily units. Building permits, often used as an indicator of future building activity, increased by 6.8% to 2.22 million, with most of the increase coming from the multifamily sector. The weather induced gain in new starts, confirming a sharp rebound in economic conditions in January, will likely fade when the weather turns cold again. The outlook is for starts to return to the moderate downward trend that was in place before last month's surge.

Import prices jumped 1.3% in January on a 6.4% surge in petroleum prices. Petroleum has gained 48.3% over the past year which accounted for 6.4% of the 8.8% annual increase in total import prices. Excluding petroleum, import prices gained 0.2% last month and are up 2.4% over the past year.

Jobless claims rose 19k to 297k for the week that ended February 11. Despite the gain claims remain quite low. The level of indicates solid labor market conditions and is consistent with monthly payroll gains of 200k.

The Philadelphia Fed survey rose to 15.4% in February from a level of 3.3% in January. New orders and shipments increased while the prices paid index slipped. The level of the index is consistent with expanding manufacturing conditions in the Mid-Atlantic region.



Stocks were able to recapture momentum in the afternoon to post gains for a third straight day Thursday amid strong economic data and robust earnings reports. H-P reported robust results that lifted blue chips and Google emerged from its recent slump to support the NASDAQ. Warm weather in January boosted not only consumer spending but construction activity as well. The Dow gained 61.71 to 11120.68, its first close above 11,100 since June 2001. The Nasdaq was up 18.20 to 2294.63.

MARKETS CLOSING CHANGE
DJIA 11120.68 61.71
S&P500 1289.38 9.38
RUSSELL 2000 731.92 6.82
NASDAQ 2294.63 18.20
SECTORS - GAINERS & LOSERS
Coal +4.76%
Travel & Tourism -5.04%



Treasuries rose modestly Thursday despite the robust economic data. Ben Bernanke in testimony today reiterated that future Fed moves are becoming increasingly data dependant. Strong data would point to more Fed rate hikes down the road but the bond market kept prices in a narrow range with Treasuries ending slightly higher on the day. The 10-year note was up 4/32 to 99-10/32 to yield 4.58%.

SECURITY YIELD CHANGE
2-Year Note 4.68 -0.01
5-Year Note 4.57 -0.02
10-Year Note 4.58 -0.02
30-Year Treasury Bond 4.56 -0.01



Mortgage rates continued to trend modestly higher this week. 30-year fixed rate mortgages averaged 6.28% this week compared to 6.24% last week according to Freddie Mac's mortgage market survey. Economists at Freddie Mac note that rates are only marginally higher than they were two months ago and remain supportive of strong housing market activity.

For the week ending 02/16/06

RATE LATEST CHANGE FEES
30-Yr Fixed (FHLMC) 6.28 0.04 0.5
15-Yr Fixed (FHLMC) 5.91 0.08 0.5
1-Yr Adj (FHLMC) 5.36 0.02 0.7
3-Mo Libor (FNMA) 4.77 0.02 n/a



RATE LATEST CHANGE
Fed Funds 4.38 -0.25
Prime Rate 7.50 0.00
Fed Discount 5.50 0.00
11th District COF 3.296 0.00

[Adam in CO]

Thursday, February 16, 2006 - 3:35 pm MST

Housing starts surged 14.5% in January to a seasonally adjusted annual pace of 2.276 million units. Unseasonably warm weather in most parts of the country last month produced the lift in construction starts which would have otherwise eased under softer housing fundamentals like rising rates, slower sales and higher inventories. New construction starts were strong across the country with significant gains in all regions. Single family starts jumped 12.8% to 1.82 million while multifamily starts increased 21.9% to 457k. That is a new higher range for multifamily units. Building permits, often used as an indicator of future building activity, increased by 6.8% to 2.22 million, with most of the increase coming from the multifamily sector. The weather induced gain in new starts, confirming a sharp rebound in economic conditions in January, will likely fade when the weather turns cold again. The outlook is for starts to return to the moderate downward trend that was in place before last month's surge.

Import prices jumped 1.3% in January on a 6.4% surge in petroleum prices. Petroleum has gained 48.3% over the past year which accounted for 6.4% of the 8.8% annual increase in total import prices. Excluding petroleum, import prices gained 0.2% last month and are up 2.4% over the past year.

Jobless claims rose 19k to 297k for the week that ended February 11. Despite the gain claims remain quite low. The level of indicates solid labor market conditions and is consistent with monthly payroll gains of 200k.

The Philadelphia Fed survey rose to 15.4% in February from a level of 3.3% in January. New orders and shipments increased while the prices paid index slipped. The level of the index is consistent with expanding manufacturing conditions in the Mid-Atlantic region.



Stocks were able to recapture momentum in the afternoon to post gains for a third straight day Thursday amid strong economic data and robust earnings reports. H-P reported robust results that lifted blue chips and Google emerged from its recent slump to support the NASDAQ. Warm weather in January boosted not only consumer spending but construction activity as well. The Dow gained 61.71 to 11120.68, its first close above 11,100 since June 2001. The Nasdaq was up 18.20 to 2294.63.

MARKETS CLOSING CHANGE
DJIA 11120.68 61.71
S&P500 1289.38 9.38
RUSSELL 2000 731.92 6.82
NASDAQ 2294.63 18.20
SECTORS - GAINERS & LOSERS
Coal +4.76%
Travel & Tourism -5.04%



Treasuries rose modestly Thursday despite the robust economic data. Ben Bernanke in testimony today reiterated that future Fed moves are becoming increasingly data dependant. Strong data would point to more Fed rate hikes down the road but the bond market kept prices in a narrow range with Treasuries ending slightly higher on the day. The 10-year note was up 4/32 to 99-10/32 to yield 4.58%.

SECURITY YIELD CHANGE
2-Year Note 4.68 -0.01
5-Year Note 4.57 -0.02
10-Year Note 4.58 -0.02
30-Year Treasury Bond 4.56 -0.01



Mortgage rates continued to trend modestly higher this week. 30-year fixed rate mortgages averaged 6.28% this week compared to 6.24% last week according to Freddie Mac's mortgage market survey. Economists at Freddie Mac note that rates are only marginally higher than they were two months ago and remain supportive of strong housing market activity.

For the week ending 02/16/06

RATE LATEST CHANGE FEES
30-Yr Fixed (FHLMC) 6.28 0.04 0.5
15-Yr Fixed (FHLMC) 5.91 0.08 0.5
1-Yr Adj (FHLMC) 5.36 0.02 0.7
3-Mo Libor (FNMA) 4.77 0.02 n/a



RATE LATEST CHANGE
Fed Funds 4.38 -0.25
Prime Rate 7.50 0.00
Fed Discount 5.50 0.00
11th District COF 3.296 0.00

[CO Hummer]

a^2 + B^2 = c^2

[Adam in CO]

Pythagorean Theorem. I love math.