“THE STARS ARE ALIGNED FOR THE ECONOMY TO TAKE OFF!” Although this sounds like it was cracked right out of a fortune cookie, this was just one of the many positive statements made by Federal Reserve Presidents earlier this week. Even in the face of such positive commentary, the stock market took a hit overall due to weak economic indicator reports, and the bond market was the happy beneficiary. The improvement in the bond market drove mortgage interest rates downward yet once again last week, as mortgage interest rates improved by approximately .125%. Mortgage interest rates now stand at their lowest levels since July.

More good news for the housing market as the National Association of Realtors said existing-home sales rose 5.5% in August to a seasonally adjusted annual sales rate of 6.47 million units, a record high well above the 6.05 million unit rate expected on Wall Street. Further underscoring the housing sector's strength, the Commerce Department said sales of new single-family homes gained 3.4% last month to an annual rate of 1.15 million units, second only to the record 1.18 million that took place last June.

To call or not to call? That is the question on many minds this week. The “Do Not Call” law which was supposed to take effect this Wednesday is now locked up in last minute legislation! Be sure to read “The Mortgage Market View” below for all the details on this hot topic.

Mortgage bonds continued their upward march and just on Friday, managed to close above a very stiff “double-layered ceiling” of resistance at both the 100 and 200-day moving averages. The current test of this resistance level is critical because it will determine the trading direction of mortgage bonds, and thus mortgage interest rates in the days or even weeks ahead. A convincing close above this barrier should result in a period of mortgage rates DECREASING by .375% to .50% from current levels. But if mortgage bonds are pushed back below this barrier, we can expect just the opposite - a quick and sharp INCREASE in mortgage rates by .375% to .50% from current levels! This is why the current showdown is so important.

The fly in the ointment…Friday’s bullish move in bonds must be tempered due to the very light trading volume as many traders left early in observance of Rosh Hashanah. Often times, moves in the market with light trading volume can lead to false indications of the markets direction. The movement early in the week will be very telling as to which way this “shootout” will end!

This week will be action packed with market moving reports being released almost every day. Which will have the most impact on mortgage interest rate direction for the week? Listen for the Chicago PMI on Tuesday, the ISM Manufacturing Index on Wednesday, Initial Jobless Claims on Thursday, and Friday brings us double action with the Employment Report and ISM Service Index. PMI…ISM…if you want to know more about the alphabet soup that could drive mortgage interest rate movement for the week, take a closer look at the Economic Indicator Calendar section for the straight scoop on these important releases.

”Do-Not-Call” Legislation in Limbo

The gloves are off as Congress and the courts battle over the national "Do-Not-Call" list, and consumers are wondering whether promised relief from telemarketers will actually become a reality. The list, which would block an estimated 80 percent of telemarketing calls, is supposed to be effective Wednesday, but it's unclear whether legal issues will be settled by then. Even after Bush signs the legislation, the FTC must win in court for the list to move forward. Supporters of the “Do-Not-Call” service had barely begun to celebrate an overwhelming vote Thursday in Congress when they learned that another judge had blocked the list from taking effect next week. "It puts a little damper on the party," said Ken Johnson, spokesman for Rep. Billy Tauzin, R-La., chairman of the House Energy and Commerce Committee. "But we're still confident of prevailing in the end."

The FTC's rules require telemarketers to check the list every three months to see who does not want to be called. Those who call listed people could be fined up to $11,000 for each violation, and consumers would file complaints to an automated phone or online system. Exemptions to the list include calls from charities, pollsters and on behalf of politicians.

The House and Senate had both voted strongly in favor of the bill on Thursday. Late that same day, U.S. District Judge Edward W. Nottingham in Denver blocked the list, handing another victory to telemarketers who argued the national registry will devastate their industry and lead to the loss of thousands of jobs. Nottingham said the do-not-call list was unconstitutional under the First Amendment because it does not apply equally to all kinds of speech. In his opinion, the key problem is that the federal ban on calls would apply to telemarketers but not to charities, political solicitors or businesses that have had previous relationships with their customers. It's unconstitutional, he found, to curtail free speech for some groups but not others. "The FTC has chosen to entangle itself too much in the consumer's decision by manipulating consumer choice," Nottingham wrote. Late Thursday, Nottingham's phone numbers surfaced on the internet, and his home and office have been bombarded with calls from angry consumers.

Until a decision is made, some telemarketing trade groups are urging its members not to call the numbers on the registry while it's in limbo. Another said its members would continue to call the more than 50 million phone numbers on the Federal Trade Commission's list. Tim Searcy, president of the Indianapolis-based American Teleservices Association, which represents only telemarketers, said Friday that his group would persist. "We say our members don't have an obligation by law not to call those numbers because the law has been found invalid. We're not obliged to abide by something that is not legitimate," he said.

U.S. Reps. Billy Tauzin, R-La., and John Dingell, D-Mich., chairman and ranking Democrat on the House Energy and Commerce Committee, slammed Nottingham's ruling, saying the registry doesn't restrict telemarketers' right to speak, but rather empowers consumers who don't want to listen. "Putting your name on the do-not-call list is no different than hanging a `no solicitation' sign on your front door. This issue is not about speech, it is about American citizens deciding who they let into the privacy of their homes," they said in a joint statement.

CLICK HERE FOR THE MMG WEEKLY LINK TO THE NATIONAL DO NOT CALL REGISTRY

This Tuesday, watch for the Chicago PMI, officially known as the “Business Barometer”.The Chicago PMI is the Purchasing Managers Index, and is a monthly report based on opinion surveys of more than 200 Chicago purchasing managers regarding the manufacturing industry. Interestingly, because it is an opinion survey, it is often influenced by respondents’ perception of current events, as opposed to actual hard data. The Chicago PMI is released the day before the ISM, and it is watched in order to predict this more important ISM report, which is in itself a good leading indicator of overall economic activity.

On Wednesday, the ISM Index will be released as a monthly report of national manufacturing conditions from the Institute for Supply Management. The Manufacturing ISM is based on data compiled from monthly replies to questions asked of purchasing and supply executives in over 400 industrial companies, weighted by each industry's contribution to GDP. Twenty industries from various U.S. geographical areas are represented. The Non-Manufacturing ISM released on Friday is based on data from more than 370 purchasing and supply executives in over 62 different industries. Financial markets are extremely sensitive to unexpected changes in this index, as the ISM is perceived as a good indicator of inflationary pressures. As a result, the bond market is highly sensitive to this report, and can cause a moderate to high short-term impact on mortgage rates.

In general, weaker than expected numbers would indicate the economy is not improving as quickly as expected, and could cause mortgage rates to improve. Positive numbers would indicate a strengthening economic climate, and could cause mortgage rates to gradually climb higher.

For the week of September 29th - October 3rd, 2003