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Mortgage stocks push forward despite abusive week

Homebuilders, investment banks post highs

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The weekend is almost here, and mortgage industry stocks are celebrating their survival after experiencing excessive volatility earlier in the week.

Markets went haywire upon the release of the Federal Open Market Committee meeting minutes, which revealed that the majority of members — besides Federal Reserve Bank of Kansas City president Esther George — are ‘broadly comfortable’ with Federal Reserve chairman Ben Bernanke’s timeline for tapering its bond-buying program.

Additionally, the lending environment also went into a frenzy after Wells Fargo (WFC) cut 20% of its mortgage production staff due to declining refinance volumes, leaving the markets wondering if this will be a permanent fix or a temporary shift in the mortgage landscape.

Fixed mortgage rates also reached new highs for the year after the central bank positioned the market to be prepared to wind down its asset purchases. To put it into perspective, the 30-year, fixed rate mortgage came in at 4.58%.

Meanwhile, the major stock-trading platform NASDAQ shutdown for three hours Thursday, but investors shrugged off the mild hiccup as stocks enjoyed their second-best day of the month.

However, the only bright spot in housing data released this week was the Federal Housing Finance Agency’s home price index, posting a 2.1% increase for the second quarter of 2013.

The data also showed that home price appreciation picked up in hardest-hit states after adjusting from unusual lows.

A positive turn in data put homebuilder stocks on top of their daily trading, with all major players up at the end of market close, when one looks at the HW 30 Index

NVR, Inc. (NVR), the parent company of Ryan Homes, NVHomes, Fox Ridge Homes and Heartland Homes, led the way, up 15.28% by the end of the day.

Morningstar Credit Ratings equity analyst James Krapel attributes such an impressive stock performance by the sector to positive market data and builder confidence.

"While it’s hard to tell if it’s a short-term bottom or if they’ll accelerate and create new highs, the space is fairly valued to slightly overvalued," Krapel explained.

Investment banks also remained their market cool, even after Moody’s Investors Service put many of these institutions on review.

For instance, JPMorgan Chase (JPM) and Wells Fargo are on review for downgrade as the agency considers reducing its assumption for how much government support the banks are expected to get.

Additionally, Bank of America (BAC) is on review, but for ‘direction uncertain’ as the credit ratings agency considers what may be more than offsetting improvements in the firm's credit strength.

Regardless, all three banking giants were higher at market close, with JPMorgan leading the way, up 0.58%.

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