By Danny Jasper, Senior Vice President, Capital Markets

Mortgages rallied Friday and stocks fell almost 300 points as the FOMC’s (Federal Market Open Committee) rate decision  last Thursday spooked investors into the safe haven of U.S. treasuries. This morning, the opposite is happening. Rates are worse and equities are rallying, as over the weekend commentary from multiple Federal Reserve (Fed) officials showed that the Fed was very much split on whether or not a rate increase last week made sense.

San Francisco Fed President John Williams and St. Louis Fed President James Bullard (a non-voting Fed member) both spoke about the hike being more than justified. Bullard was rather spirited in his disagreement with the FOMC decision, arguing that “the case for policy normalization is quite strong since the committee’s objectives have essentially been met.”

Those two joined Jeffrey Lacker (who dissented from Thursday’s vote) and have made it clear that a rate increase before the end of the year is still very much on the table.  Fed funds futures closed Friday trading with a 49% chance that a rate rise would occur in December.  After moving as low as 2.12% Friday and closing at 2.133%, the 10-year was back up to 2.19% Monday morning.

Greece Re-Enters Limelight

In overseas news, Greece is back in the limelight as Greeks have re-elected Syriza party head Alexis Tsipras as the head of the struggling country.  Tsipras resigned earlier this year after he was forced to cave to austerity requirements by European creditors in order to save the country from defaulting on its debt obligations. Tsipras’s re-election by a wide margin has given confidence to the Eurozone, as the theme has changed to a much larger effort to work with creditors to meet common goals, and European stocks are up over 1% today as a result.

Existing Home Sales Fall More Than Expected

The week ahead is relatively light with U.S. economic news.  This Monday morning, existing home sales for August came in worse than expectations, with 5.31 million existing homes sold last month.  The number is 190,000 less homes than had been predicted, good for a -4.8% decrease vs. a -1.6% analyst estimate.

Existing home sales had been the biggest sign of strength for the housing market as opposed to new home sales, which hasn’t impressed over the last few months.  Not a good sign if this turns out to be more than a one-month miss.  New home sales data will be released on Thursday, so perhaps we’ll see a beat there that offsets today’s miss.

Other highlights on this week’s U.S. economic calendar include durable goods orders for August on Thursday (which had a solid gain last month after flat-lining earlier this year), and Q2 GDP revisions on Friday.  The latter is expected to show a solid gain for year-over-year GDP after consumer spending and consumption has increased.  The Fed will sell $26 billion in two-year notes tomorrow, $35 billion in five-year notes Wednesday, and $29 billion in seven-year notes Thursday.

This week’s economic calendar (courtesy of the FNMA trading desk):

Date Time Event   Survey Actual Prior Revised
09/21/2015 10:00 Existing Home Sales Aug 5.50M 5.31M 5.59M 5.58M
09/21/2015 10:00 Existing Home Sales MoM Aug -1.60% -4.8% 2.00% 1.8%
09/22/2015 09:00 FHFA House Price Index MoM Jul 0.40% — 0.20% —
09/22/2015 10:00 Richmond Fed Manufact. Index Sep 2 — 0 —
09/23/2015 07:00 MBA Mortgage Applications 18-Sep — — -7.00% —
09/23/2015 09:45 Markit US Manufacturing PMI Sep P 52.7 — 53 —
09/24/2015 08:30 Chicago Fed Nat Activity Index Aug 0.24 — 0.34 —
09/24/2015 08:30 Initial Jobless Claims 19-Sep 274K — 264K —
09/24/2015 08:30 Continuing Claims 12-Sep 2240K — 2237K —
09/24/2015 08:30 Durable Goods Orders Aug -2.30% — 2.00% 2.20%
09/24/2015 08:30 Durables Ex Transportation Aug 0.10% — 0.60% 0.40%
09/24/2015 08:30 Cap Goods Orders Nondef Ex Air Aug -0.10% — 2.20% 2.10%
09/24/2015 08:30 Cap Goods Ship Nondef Ex Air Aug 0.50% — 0.60% —
09/24/2015 09:45 Bloomberg Consumer Comfort 20-Sep — — 40.2 —
09/24/2015 10:00 New Home Sales Aug 515K — 507K —
09/24/2015 10:00 New Home Sales MoM Aug 1.60% — 5.40% —
09/24/2015 11:00 Kansas City Fed Manf. Activity Sep -6 — -9 —
09/25/2015 08:30 GDP Annualized QoQ 2Q T 3.70% — 3.70% —
09/25/2015 08:30 Personal Consumption 2Q T 3.20% — 3.10% —
09/25/2015 08:30 GDP Price Index 2Q T 2.10% — 2.10% —
09/25/2015 08:30 Core PCE QoQ 2Q T 1.80% — 1.80% —
09/25/2015 09:45 Markit US Composite PMI Sep P — — 55.7 —
09/25/2015 09:45 Markit US Services PMI Sep P 55.6 — 56.1 —
09/25/2015 10:00 U. of Mich. Sentiment Sep F 86.5 — 85.7 —
09/25/2015 10:00 U. of Mich. Current Conditions Sep F — — 100.3 —
09/25/2015 10:00 U. of Mich. Expectations Sep F — — 76.4 —
09/25/2015 10:00 U. of Mich. 1 Yr Inflation Sep F — — 2.90% —
09/25/2015 10:00 U. of Mich. 5-10 Yr Inflation Sep F — — 2.80% —