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Interest Rates Dominate the Chatter

Interest rates the topic on stock trading desks this morning. I briefly saw a friend of mine who works for a mortgage company yesterday. He was working late updating the mortgage quotes for his company and was somewhat in a state of shock: 30-year mortgage rates had gone up over a tenth of a point in a single day, an almost unheard-of jump. Thirty-year fixed rate mortgages have gone from roughly 4.75 percent a few weeks ago to 5.125 percent likely today.

We're going to find out very quickly how important low rates are to the housing recovery/

Still, it's not bad news...most stock traders this morning have believed that interest rates are too low and that a turnaround in the economy, though slow, is underway.

Steeper yield curves, of course, are a big help to banks' net interest margins.

Elsewhere:

1) the S&P 500 will try again today to break out convincingly into new high territory (over 1,114); it has failed to do that for over a month now.

2) Futures dropped a couple points as the final revision for Q3 GDP came in well below expectations, to 2.2 percent growth, from 2.8 percent.

3) Jabil Circuit jumps 8 percent pre-open after reporting better-than-expected Q1 earnings ($0.32 vs. $0.29 expected) as improved margins helped. The electronics component maker also guided earnings above the Street's forecast for its current quarter ($0.20-$0.32 vs. $0.19 consensus).

4) Commercial Metals drops 9 percent in pre-market trading after reporting a wider loss than expected. Conditions in the U.S. continued to be weaker than economies overseas. The steelmaker's CEO Murray McClean pointed out that Australia's economy "was in full recovery" while China "continued to sustain impressive GDP growth.

Back on the home front, however, commentary was more downbeat: "Real sustainable domestic increases in demand were not apparent and there was no discernable stimulus effect."

Looking ahead, the company expects some effects of U.S. stimulus programs to appear by the spring, but points out China's expected GDP growth 9 percent-10 percent will be the significant catalyst to iron ore prices in 2010.

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