Newton Condominiums

In spite of selling in U.S. Treasury securities, mortgage rates held tough on Friday, refusing to move even as yields were rising. A report on durable goods orders for January and an attempted bombing of a Saudi oil refinery fostered some safe-haven buying of Treasuries earlier in the day. But a closer look at these events turned the markets around. As selling increased, Treasury prices fell, and yields, which move in the opposite direction of prices, rose. But mortgage lenders, who use yields as a guide to set rates, were able to hold them close to yesterday's levels.

Durable goods orders got everyone's attention this morning by dropping 10.2 percent in January -- the biggest decline since July 2000. A closer look revealed that a dearth of aircraft orders was the reason for the sharp drop-off. When transportation orders were excluded, durables -- big-ticket items meant to last more than three years -- rose 0.6 percent, which was above estimates for a 0.4-percent increase. Orders for durables are tied to manufacturing, and the positive number increased concerns about economic growth.

The incident at the Saudi refinery -- the largest in the world -- sent oil prices skyrocketing. An explosion occurred when security guards shot at a truck loaded with explosives. Production at the refinery was not slowed, but concerns about future attacks, as well as present threats to oil fields in Nigeria and Iran, resulted in a 3.9-percent hike in oil. Prices shot up 3.9 percent to $62.91 a barrel. The bond markets regard higher prices as inflationary.

Stocks struggle, close mixed

Stocks were volatile on Friday, with some pulling back due to a series of earnings misses by some high-profile companies such as Gap, Nordstrom and H&R Block. Escalating oil prices also weighed on Wall Street, although oil stocks put up some big numbers. The Nasdaq posted the best gains of the session, helped by Research in Motion, creators of the popular BlackBerry. The judge in the patent infringement case opted not to close down BlackBerry e-mail service, boosting the stock almost 6 percent.

The Dow Jones industrials spent most of the session in negative territory, weighed down by once again by GM, which lost 2.9 percent. Other components posting substantial losses were Altria and AT&T, which shed 1.3 percent each and Hewlett-Packard, which was down 1.1 percent. Of the 16 components to close in positive territory, only JP Morgan Chase & Co. gained more than 1 percent on the session.

The Nasdaq benefited from spectacular gains by some smaller companies while big-cap techs took a rest. Only JDS Uniphase, with a 2.7 percent increase, had a gain worth reporting, but companies such as Toreador Resources Corp., which deals in oil exploration, and Parallel Petroleum Company did well today, gaining 11.2 percent and 15.8 percent, respectively. Weighing on the Nasdaq was Merge Technologies, a medical imaging software company, which lost 16.3 percent after delaying the release of its fourth-quarter earnings and warning that it would miss forecasts.

As of 4 p.m., EST:

The Dow Jones industrial index closed down 7.37 points (-0.07 percent) to 11,061.85; the Nasdaq composite gained 7.72 points (+0.34 percent) to 2,287.04, and the Standard & Poor's 500 index rose 1.64 points (+0.13 percent) to 1,289.43.

The 30-year Treasury bond closed down 9/32 in price with the yield rising to 4.52 percent, from 4.5 percent on Thursday.

The 10-year Treasury note closed down 4/32 in price with the yield rising to 4.57 percent, from 4.56 percent on Thursday.

The five-year Treasury note closed down 3/32 price with the yield rising to 4.63 percent, from 4.61 percent on Thursday.

The two-year Treasury note closed flat in price with the yield rising to 4.72 percent, from 4.71 percent on Thursday.

At 4 p.m. EST, average mortgage rates (zero discount points) based on rates collected nationwide were:

The 30-year conventional fixed-rate mortgage was at 5.996 percent, down from 6.001 percent on Thursday.

The 15-year conventional fixed-rate mortgage was at 5.597 percent, up from 5.595 percent on Thursday.

Coming up:

Next week is huge when it comes to economic news. There are several market-movers on tap, including home sales, manufacturing data, personal incomes and outlays for January, revised fourth-quarter gross domestic product, and two consumer confidence reports for February.

The week begins with January new-home sales, which will be closely watched after the rebound in December. Analysts are expecting sales to come in at an annual rate of 1.25 million units, which is slightly below the 1.27 million rate reported in December.

Over the weekend and into Monday it is likely that mortgage rates will hold close to present levels due to the relative steadiness in Treasury yields on Friday.

Carolyn Siegel

Carolyn@interest.com

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