Market Analysis

Analysis from Larry Baer with Market Alert on this afternoon's activity:

Update 2:30 p.m. ET:  Federal Reserve Chairman Bernanke, speaking this afternoon on "Economic Challenges: 1975 and Now" at Harvard University's Alumni Association Class Day said, "The overall inflation rate has averaged about 3.5% over the past four quarters, significantly higher than we would like but much less than double-digit rates that inflation reached in the mid-1970's and then again in 1980."

Mortgage investors focused exclusively on Mr. Bernanke's description of inflation as "significantly higher than we would like" -- which immediately ignited a knee-jerk round of panic selling in the mortgage market.  Calmer, cooler heads will soon realize that Mr. Bernanke was really just making a historical analogy - not offhandedly presenting a major hint that a mortgage market unfriendly rate hike from the Fed is right around the corner.

This event is likely overstated.  Look for mortgage investors to compose themselves and for normal market conditions to return by later today.  I'm not suggesting we're on the verge of a major rally - I'm just pointing out that in this case we're likely dealing with a little fear mongering that got out of hand.  Play it by the numbers.