It is a pretty subdued trading day, especially considering what is happening in Washington.  The major indices are all in the green slightly, with the Nasdaq outperforming.  The greenback is up to $97.42, and treasury yields are rather flat, with the 2-year unchanged at 1.63%, and the benchmark 10-year up 4 basis points to 1.93%, as the yield curve continues to steepen.

Speaking of rates, mortgage applications fell 5% last week as interest rates were essentially unchanged. However, volume is up by 65% from the prior year, as low interest rates have bolstered new purchases and refinancing.  

• Purchase -2%, but 10% higher from prior year, which indicates just how tight the market is, especially for first time homebuyers.
• Refinance -7%, but up 135% year over year

According to Mike Fratantoni, MBA’s chief economist "Mortgage rates were mostly unchanged, even as a potential trade deal between the U.S. and China caused rates to inch forward at the end of last week." He added, “2019 was another year of inadequate housing supply in relation to demand. The good news is that the tide could be slowly turning for potential buyers. Housing starts and permits rose strongly in November, and homebuilder confidence has surged to a level not seen since 1999.”

Real Estate is the best performing sector today, followed by energy.

Energy is up today, with WTI now trading at $61.08 a barrel.  EIA inventories showed a decline of 1.1 million barrels, while gasoline grew 2.5 million barrels and distillates rose 1.5 million barrels.  Oil was initially lower on the news, but it reversed as the optimism for demand expectations from things like the U.S.-China trade deal added to oil’s upward trend.

Let’s not force the issue this afternoon.