This week is packed with economic releases and major events that will likely lead to a fair amount of volatility in the markets and mortgage pricing. There are seven reports scheduled for release along with another FOMC meeting. There is no relevant data due tomorrow, so all seven reports come over four days.
The first data will be posted Tuesday morni ng with the release of the Consumer Confidence Index (CCI) for the month of October. This Conference Board index will be posted at 10:00 AM and gives us a measurement of consumer willingness to spend. It is expected to show a small increase from last month's 99.8 reading, indicating that consumers are more likely to make large purchases in the near future. As long as the reading doesn't exceed 100.0, we will likely see the bond market react favorably to this report. This data is watched closely because consumer spending makes up two-thirds of the U.S. economy.
The second report of the week will be posted Wednesday morning with the release of the preliminary reading of the 3rd Quarter Gross Domestic Product (GDP). The GDP is considered to be the benchmark measurement of economic growth because it is the sum of all goods and services produced in the U.S. and is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Wednesday's release is the first and usually has the biggest impact on the markets. Current forecasts call for an increase of approximately 3.1% in the GDP. I think we need to see a smaller increase for the bond market to rally and mortgage rates to drop. Just matching the estimate will probably bring a stock market rally and could cause mortgage rates to rise.
The second report of the day will be the 3rd Quarter Employment Cost Index (ECI), which tracks employer costs for salaries and benefits. Rapidly rising costs raises wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.9%. A smaller than expected increase would be good news for bonds and mortgage rates.
The week's FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. It is expected to bring another rate cut to key short-term interest rates. Assuming this does happ en, traders will be looking at the post-meeting statement for any indication of the Fed's next move. While it is widely expected that the Fed will cuts rates at this meeting, there is a lot of different opinions of when the following cut will come, if at all. The meeting will adjourn at 2:00 PM Wednesday, so look for quite a bit of volatility during afternoon hours.
September's Personal Income and Outlays report will be posted early Thursday morning. This data gives us an indication of consumer ability to spend and current spending habits. It is important to the markets because consumer spending makes up two-thirds of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns, making long-term securities such as mortgage related bonds less attractive to investors. Analysts are expecting to see in creases of 0.4% in income and 0.4% in outlays.
The Institute for Supply Management (ISM) will release their Manufacturing Index for October late Thursday morning. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. Current forecasts call for a no change from September's 52.0 reading. If we get a reading below 52.0, we should see mortgage rates drop Thursday morning. On the other hand, a reading above 52, indicating manufacturing activity is strengthening, could fuel a stock rally and drive mortgage rates higher.
Friday brings us the release of one of the most important monthly reports- the Employment report. The Labor Department will post October's employment stats early Friday morning. The report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earning s. Current forecasts call for no change in the unemployment rate of 4.7%, new payrolls up approximately 90,000 and a 0.3% increase in average earnings. The ideal scenario for mortgage shoppers would be a higher unemployment rate than 4.7%, a smaller than expected increase in jobs and no increase in the earnings portion.
Also on tap for Friday is September's Factory Orders report. This report is similar to last week's Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show 1.0% rise in orders from August's level. A larger increase would be bad news for the bond market and mortgage rates while a much smaller than expected increase is good news. However, with the almighty Employment report being released ahead of it, I doubt this data will affect mortgage rates Friday.
Overall, it is going to be a pretty active week for the bond market and mortgage rates. Wednesday's GDP report and Frid ay's Employment report are the single most important releases of the week. Wednesday will likely be the most important day with the GDP and FOMC meeting, but Friday's data can also lead to sizable changes in mortgage rates. I am expecting to see significant movement in rates this week, so please maintain contact with your mortgage professional.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
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