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For the week of Aug 10, 2009 --- Vol. 7, Issue 32

Last Week in Review

Heigh Ho, Heigh Ho, It's Off to Work We Go! If ever there was a week to sing that old Disney® song, it was last week when Americans received some good employment news. Despite a worse-than-expected ADP National Employment report - which isn't known for its accuracy - the Initial Jobless Claims report came in on Thursday with some good news. According to the report, Americans filing for unemployment benefits came in at 550,000, versus the 580,000 expected. In addition, the four-week moving average declined for the sixth consecutive week.

The markets received more evidence of an improving job market on Friday. The Labor Department reported 247,000 jobs lost in July versus economists' expectations of 328,000 jobs lost. As you can see in the chart below, this is down pretty sharply from June's lower, revised 443,000 jobs lost and the smallest loss since August 2008. Even better, the Unemployment Rate dropped to 9.4%, from the prior month's reading of 9.5%. This reading broke a streak of 9 straight monthly increases and gave a lot of credibility to the good news in the job market.

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Chart: US Non-Farm Payroll (jobs losses shown in thousands)

The employment news is good news for the economy because it may signal that the worst recession in our lifetime could be ending. That said, the Obama Administration agreed on Friday that we're seeing the light at the end of the tunnel, but cautioned that the country still has a lot further to go and that the US will not have a true recovery as long as job losses continue.

A stronger job market can also signal improvement in the housing market. We saw indication of that last week as the Pending Home Sales Index came in at 3.6%, which was much better than the 0.7% that was expected. The National Association of Realtors also reported that Pending Home Sales rose in June for the fifth straight month, fueled by low home loan rates and bargain home prices. Overall, the news was a strong indication that the housing market may be looking to improve.

SPEAKING OF IMPROVEMENT - IF YOU ARE LIKE MOST PEOPLE, YOUR COMPUTER COULD ALSO USE SOME IMPROVEMENT. CHECK OUT THE MORTGAGE MARKET VIEW BELOW FOR 8 SIMPLE TIPS TO BOOST YOUR COMPUTER'S PERFORMANCE AND PERHAPS SQUEEZE A FEW MORE MONTHS OUT OF YOUR CURRENT MACHINE, RATHER THAN SHELLING OUT MONEY FOR NEW HARDWARE.

Overall, the economic news helped boost Stocks, as the Dow gained 114 points to close the week at its highest level of the year. The economic news and increase in Stocks last week, however, put pressure on Bonds, which ended the week lower, putting upward pressure on home loan rates.

Forecast for the Week

The Retail Sales Report comes out this Thursday, giving us our first picture of consumer spending for the month of July. Last month's report came in better than expectations at 0.6%, but that number was slightly skewed by the high gasoline station sales. This month's reading is expected to come in at 0.4%. With this report, we will see, among other things, how much impact the government's Cash for Clunkers program has had on the retail picture.

Another big mover this week could be the Consumer Price Index, which is due out on Friday. Last month's report showed that the cost of living in the US rose more than forecast, due largely to a jump in energy costs. Overall, core inflation remained in the Fed's comfort zone, but that didn't stop inflation concerns from becoming a hot topic. And for good reason - when lenders see changes in inflation or even anticipate a rise, they may increase their interest rates to make up for the losses they expect. With concerns already out there, lenders and investors will be watching this report closely.

In addition to these reports, the Treasury's record auction of $75 Billion worth of 3-year and 10-year Notes could shake things up. The markets will definitely be paying attention to how the auction is received. Why? Let's look at it this way, the flood of auctions lately has been like an all-you-can-eat buffet of Treasury securities - as fast as the offerings can be bought, the Treasury keeps refilling the bowls with a seemingly endless amount of supply. In the end, investor appetites may slow down as more and more supply just keeps on coming. Should that happen, higher rates may be needed to induce further buying. I will keep an eye on this situation this week and keep you posted.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Mortgage Bonds traded sharply lower due to strong Pending Home Sales, the announcement of another Treasury auction, and better-than-expected employment news.

Chart: Fannie Mae 4.5% Mortgage Bond (Friday Aug 07, 2009)

The Mortgage Market View...

8 Tips to Improve Your Computer's Performance

It's hard to believe that in just a few short weeks, the majority of schools across the country will be back in session. No matter how much you and your family have used your computer this summer, now is a great time to make sure your desktop of laptop is in top shape for the school year.

Here are 8 tips to help improve your computer's performance and save you from the unexpected expense of needing to replace a computer that stops working at optimal levels.

•1.   Purchase a Quality Antivirus Program: When you purchase antivirus software, it is important to make sure that, in addition to virus protection, it also protects against spyware and adware. While viruses have the ability to wipe out a computer, the spyware and adware can slow your machine to a snail's pace and compromise your personal information. Be sure to keep your software current by downloading any updates. Also, remember to renew your subscription every year.

•2.   Perform Your Windows Updates: Your computer will periodically instruct you that there are available Windows updates. It is important to perform these updates, as many will pertain to both computer security and overall operations. You can also set Windows to automatically update for you.

•3.   Use Your Windows Firewall: Newer versions of Microsoft Windows (including most versions available in the last 10 years) come equipped with a personal firewall, which can protect your personal network from any outside networks. But it only works if it is turned on. On newer versions of Windows, you can access your firewall settings by clicking the "Start" menu, selecting "Control Panel" and then selecting "Security Center".

For older versions, you can click the "Start" menu. Now click the "Run" button (or type run in the Start Search field). When the run window appears, type firewall.cpl and click "OK." The firewall settings are under the "General" tab.

•4.   Make Sure You Have Plenty of RAM: Not to be confused with hard drive space, RAM is the memory your computer uses to run programs and data for files you are currently working on. If you run more programs than your computer's RAM can handle at one time, it will run more slowly as the programs compete for RAM. To fix the problem, you don't necessarily need to purchase a whole new computer. Instead, try purchasing more RAM from a local computer store.

•5.   Uninstall Any Unused Programs: Now that you've learned about the importance of RAM, you can understand why it's crucial to keep only the programs you use. To delete any unused programs, click "Start" and then click on "Control Panel." Find the icon that says "Add or Remove Programs," and click it on. Scroll down to find the appropriate program, and have it removed. Your computer will prompt you with instructions.

•6.   Perform Regular Housecleaning: Regularly deleting your temporary Internet files, cookies, and Internet history will do wonders for maintaining a quick and clean PC. To do so, click "Tools" on the taskbar of your Internet browser. Scroll down and click on "Internet Options." From there, select what you would like to delete. Another bit of housekeeping you should regularly perform is emptying your trash bin.

•7.   Defragment (Defrag) Your Hard Drive: Defragmenting your hard drive may be the single best thing you can do to keep your computer running optimally. As you add programs and data to your computer, the information in question takes up blocks of actual physical space on the hard drive. Whenever one of those blocks is deleted, a blank space is created. By defragmenting your computer, you remove the blank spaces and create a more efficient pathway.

In order to perform a "defrag" on your hard drive, start by double-clicking your "My Computer" icon. Next, right-click on the "C-Drive" option. Click "Properties," "Tools," and then "Defragment Now." Depending on how fragmented your computer's hard drive is, some system defrags can take several hours - and during that time, you cannot use your computer.

•8.   Use an Email Service with a Good Spam Filter: The ability for an email service to effectively filter out insidious spam emails is highly important when it comes to minimizing your risk. In addition to regularly cleaning out your email spam file, you should also never give personal information via an email.

By taking a proactive approach with your computer, you will save yourself a lot of time, money, and frustration...and be all ready for the coming school year!

The Week's Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of August 10 - August 14

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