Bernanke Says Housing Downturn Sharper Than Expected

Bernanke gave a speech this morning, in which he said that the housing downturn was sharp and longer than expected. I'm not sure I agree though. Given the strong, multi-year runup we experienced in housing (driven by low interest rates), I think that the reaction has been fairly muted in most parts. There was some carnage in the subprime sector, but the pain was pretty concentrated.

Regardless, his comments are weighing on the markets in early trading. I can't count how many days the market has opened weak, only to rally into the close. Yesterday was another great example of this, following the morning weakness stemming from China. This is classic bull market action.

We also got a strong economic report, with the ISM Services Index coming in stronger than expected (59.7 vs. 55.5). This has many market participants feeling that the Fed isn't likely to lower interest rates. But I'm sure that's just how the Fed likes it. They certainly aren't going to telegraph it and make it easy for investors to predict. Though maybe they should.

Oil is trading lower a bit, weighing on the energy complex. And bond yields are higher, with the 10-year closing in on the psychological 5.0% level (currently 4.97%).

I am almost fully settled in at the new office, so my blogging should be up to full speed in no time.