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Market
Comment
Mortgage bond prices finished the week sharply lower which put significant upward pressure on rates. Rates worsened every day except for Thursday when they held steady. The Middle East conflict along with higher inflation readings stoked fear and uncertainty. Existing home sales were 4.02M vs 4.05M. Consumer prices rose 0.6% as expected. The core rose 0.4% vs 0.3%. Producer prices rose 1.4% vs 0.5%. The core rose 1% vs 0.3%. Retail sales rose 0.5% as expected. Weekly jobless claims were 211K vs 205K. Industrial production rose 0.7% vs 0.3%. Capacity use was 76.1% vs 75.8%. Mortgage interest rates finished the week worse by approximately a full discount point.
LOOKING
AHEAD
|
Economic
Indicator |
Release
Date &
Time |
Consensus
Estimate |
Analysis
|
|
NAHB Housing Index |
Monday, May 18,
10:00 am, et
|
34
|
Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates.
|
| Fed Minutes |
Wednesday, May 20,
2:00 pm, et
|
None
|
Important. Details of the last Fed meeting will be thoroughly analyzed.
|
| Housing Starts |
Thursday, May 21,
8:30 am, et
|
1.42M
|
Important. A measure of housing sector strength. Weakness may lead to lower rates.
|
| Philadelphia Fed Survey |
Thursday, May 21,
8:30 am, et
|
15.5
|
Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
|
| Weekly Jobless Claims |
Thursday, May 21,
8:30 am, et
|
210K
|
Important. An indication of employment. Higher claims may result in lower rates.
|
| U of Michigan Consumer Sentiment |
Friday, May 22,
10:00 am, et
|
48.2
|
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
|
| Leading Economic Indicators |
Friday, May 22,
10:00 am, et
|
Down 0.2%
|
Important. An indication of future economic activity. A smaller increase may lead to lower rates.
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Housing Starts
Housing starts data is a leading indicator of the state of our economy. This report, provided by the Bureau of the Census, considers data from both single-family homes and multi-family dwellings. Building permits are also released with the housing starts data. By knowing the number of permits issued monthly, analysts can attempt to estimate for the upcoming months. Normally, starts are 10% higher than permits since all locations are not required to have a building permit.
Housing starts and permits give a warning of future economic activity. In effect, a rise in housing starts can lead to a fall in the bond market and vice versa. Consumers tend to hold off on the purchase of new homes, new cars, and other big-ticket items if they are worried about the future of the economy. Housing is an important part of our economy. Declines in housing starts can lead to economic slowdown. On the other hand, increases in housing starts can signal positives for the economy. From the opposite perspective, changes in interest rates often lead to changes in housing starts. Higher interest rates can cause a significant decline in home sales, which can lead to a drop in housing starts. Just the opposite happens when rates remain low. Low mortgage rates affect both home sales and housing starts.
There are great uncertainties that even the Fed struggles to predict. Be cautious in this interest rate environment. Floating is very risky.
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