Mortgage bond prices finished the week slightly lower which pushed rates a bit higher. Most of the weakness came Monday morning as traders positioned themselves ahead of the holiday break. The data was mixed. Existing home sales were weaker than expected with a reading of 5.36M versus the expected 5.45M. Third quarter gross domestic product rose 2.1% as expected. Durable goods rose 3% versus the expected 1.5% increase which was not rate friendly. PCE Core inflation was unchanged versus an expected 0.1% increase. Personal Income rose 0.4% as expected. Spending rose 0.1% versus the expected 0.3% increase. New home sales were slightly weaker than expected at 495K. Analysts predicted sales at 500K. Mortgage interest rates finished the week unchanged to worse by approximately 1/8 of a discount point. ISM Index The Institute for Supply Management (ISM), formerly the National Association of Purchasing Management (NAPM), releases the "Report on Business" on the first working day of each month. Part of this report is the "diffusion index," which tracks the economy's ups and downs fairly well. In conducting this survey, the ISM questions purchasing executives from over 250 industrial companies compiling data on production, orders, commodity prices, inventories, vendor performance, and employment. Each of the respondents is asked to rank the categories as "up" or "down." Various weights are applied to the individual components to form the composite index. A composite index reading of 50 can be thought of as a "swing point." A reading above 50 implies an increase in economic activity, while a reading below 50 indicates a decline. The ISM report is difficult for economists to forecast because there is little data upon which to base an educated guess. The report has a large "surprise factor" and can cause market swings. Be cautious heading into the release.
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