Market Focus

[Adam in CO]

Monday, February 27, 2006 - 3:30 pm MST

New home sales continued to slow last month dropping 5.0% to a seasonally adjusted annual rate of 1.233 million, compared to expectations for a pace of 1.260 million. New home sales are counted when the contract is signed so these data reflect current sales activity. Regionally sales fell sharply in all areas except for the West where they increased 11.3%. The inventory of homes for sales rose 2.5% to a record 5.28k which translates into 5.2 months' supply at the current sales pace. Home prices gained with median prices up 6.7% and average prices climbing 3.0% over the past year however the downward trend for prices remains in place. Demand for new homes is trending lower from record highs reached last year with declines in 4 of the last 6 months. High inventory levels and declining mortgage application activity suggests that the softening in the housing market will continue going forward.



Stocks advanced Monday on falling oil prices and perceptions of strong economic conditions. Despite slowing housing market indicators, Lowe's posted big gains today which also carried stocks forward. Light sweet crude for April delivery fell $1.91 to $61 a barrel on the Nymex today. The Dow was up 35.70 to 11097.55. The NASDAQ gained 20.14 to 2307.18.

MARKETS CLOSING CHANGE
DJIA 11097.55 35.70
S&P500 1294.12 4.69
RUSSELL 2000 740.63 4.03
NASDAQ 2307.18 20.14
SECTORS - GAINERS & LOSERS
Home Improvement Retail +3.19%
Gold Mining -5.31%



Treasuries fell Monday as a slew of new corporate and commercial-mortgage debt hit the bond market. Anticipation of strong data later in the week also weighed. Weaker new home sales data limited the downside today. Treasuries could get a boost tomorrow from month-end adjustments by fund managers. In late trading the 10-year note was down 5/32 to 99-7/32 to yield 4.59%.

SECURITY YIELD CHANGE
2-Year Note 4.73 0.01
5-Year Note 4.65 0.01
10-Year Note 4.59 0.02
30-Year Treasury Bond 4.55 0.03



This week's economic data is expected to show a strong first quarter rebound despite a slowing housing market. Look for readings on consumer confidence and sentiment, personal income and outlays, existing home sales and construction spending, national manufacturing and service sector activity and motor vehicle sales. Also, revisions to fourth quarter GDP are expected to show faster growth as well with estimates centered on a 1.6% growth rate, up from 1.1% originally. Stronger economic data will continue to firm rate hike expectations. Fed funds futures traders are pricing in nearly a 100% chance of a quarter point rate hike at the March 28 meeting and a 79% probability for another one at the following meeting, May 10.

For the week ending 02/23/06

RATE LATEST CHANGE FEES
30-Yr Fixed (FHLMC) 6.26 -0.02 0.6
15-Yr Fixed (FHLMC) 5.89 -0.02 0.6
1-Yr Adj (FHLMC) 5.32 -0.04 0.7
3-Mo Libor (FNMA) 4.82 0.01 n/a



RATE LATEST CHANGE
Fed Funds 4.50 0.00
Prime Rate 7.50 0.00
Fed Discount 5.50 0.00
11th District COF 3.296 0.00

[Adam in CO]

Monday, February 27, 2006 - 3:30 pm MST

New home sales continued to slow last month dropping 5.0% to a seasonally adjusted annual rate of 1.233 million, compared to expectations for a pace of 1.260 million. New home sales are counted when the contract is signed so these data reflect current sales activity. Regionally sales fell sharply in all areas except for the West where they increased 11.3%. The inventory of homes for sales rose 2.5% to a record 5.28k which translates into 5.2 months' supply at the current sales pace. Home prices gained with median prices up 6.7% and average prices climbing 3.0% over the past year however the downward trend for prices remains in place. Demand for new homes is trending lower from record highs reached last year with declines in 4 of the last 6 months. High inventory levels and declining mortgage application activity suggests that the softening in the housing market will continue going forward.



Stocks advanced Monday on falling oil prices and perceptions of strong economic conditions. Despite slowing housing market indicators, Lowe's posted big gains today which also carried stocks forward. Light sweet crude for April delivery fell $1.91 to $61 a barrel on the Nymex today. The Dow was up 35.70 to 11097.55. The NASDAQ gained 20.14 to 2307.18.

MARKETS CLOSING CHANGE
DJIA 11097.55 35.70
S&P500 1294.12 4.69
RUSSELL 2000 740.63 4.03
NASDAQ 2307.18 20.14
SECTORS - GAINERS & LOSERS
Home Improvement Retail +3.19%
Gold Mining -5.31%



Treasuries fell Monday as a slew of new corporate and commercial-mortgage debt hit the bond market. Anticipation of strong data later in the week also weighed. Weaker new home sales data limited the downside today. Treasuries could get a boost tomorrow from month-end adjustments by fund managers. In late trading the 10-year note was down 5/32 to 99-7/32 to yield 4.59%.

SECURITY YIELD CHANGE
2-Year Note 4.73 0.01
5-Year Note 4.65 0.01
10-Year Note 4.59 0.02
30-Year Treasury Bond 4.55 0.03



This week's economic data is expected to show a strong first quarter rebound despite a slowing housing market. Look for readings on consumer confidence and sentiment, personal income and outlays, existing home sales and construction spending, national manufacturing and service sector activity and motor vehicle sales. Also, revisions to fourth quarter GDP are expected to show faster growth as well with estimates centered on a 1.6% growth rate, up from 1.1% originally. Stronger economic data will continue to firm rate hike expectations. Fed funds futures traders are pricing in nearly a 100% chance of a quarter point rate hike at the March 28 meeting and a 79% probability for another one at the following meeting, May 10.

For the week ending 02/23/06

RATE LATEST CHANGE FEES
30-Yr Fixed (FHLMC) 6.26 -0.02 0.6
15-Yr Fixed (FHLMC) 5.89 -0.02 0.6
1-Yr Adj (FHLMC) 5.32 -0.04 0.7
3-Mo Libor (FNMA) 4.82 0.01 n/a



RATE LATEST CHANGE
Fed Funds 4.50 0.00
Prime Rate 7.50 0.00
Fed Discount 5.50 0.00
11th District COF 3.296 0.00

[PARAGON]

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