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Market
Comment
Mortgage bond prices finished the week lower which put upward pressure on rates. Trading broke out of the narrow ranges seen over the past few months as war started in the Middle East. Stocks and bonds saw extreme volatility. The data was mixed but did little to buffer the increased fear and anxiety in the financial markets. ISM Index was 52.4 vs 51.8. ADP employment was 63K vs 50K. Weekly jobless claims were 213K vs 215K. Productivity rose 2.8% vs 1.9%. The Fed “Beige Book” reported wages rose at a modest pace, economic activity grew slightly in 7 of 12 districts, but 5 districts reported declining activity. Mortgage interest rates finished the week worse by approximately 1/4 to 3/8 of a discount point.
LOOKING
AHEAD
|
Economic
Indicator |
Release
Date &
Time |
Consensus
Estimate |
Analysis
|
| Weekly ADP Employment |
Tuesday, March 10,
8:30 am, et
|
12K
|
Important. An indication of employment. Weakness may bring lower rates.
|
| Consumer Price Index |
Wednesday, March 11,
8:30 am, et
|
Up 0.2%,
Core up 0.2%
|
Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates.
|
| Trade Data |
Wednesday, March 11,
8:30 am, et
|
$70B deficit
|
Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
|
| Housing Starts |
Thursday, March 12,
8:30 am, et
|
625K
|
Important. A measure of housing sector strength. Weakness may lead to lower rates.
|
| Personal Income and Outlays |
Friday, March 13,
8:30 am, et
|
Up 0.3%,
Up 0.4%
|
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
|
| PCE Core Inflation |
Friday, March 13,
8:30 am, et
|
Up 0.4%
|
Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
|
| Q3 GDP |
Friday, March 13,
8:30 am, et
|
Up 1.4%
|
Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
|
| U of Michigan Consumer Sentiment |
Friday, March 13,
10:00 am, et
|
56.5
|
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
|
Weak Employment
The U.S. Bureau of Labor Statistics creates the employment report each month. The report presents statistics from two monthly surveys. The household survey measures labor force status, including unemployment, by demographic characteristics. The establishment survey measures nonfarm employment, hours, and earnings by industry. The weak employment report released Friday caused more fear and uncertainty. Unemployment was 4.4% vs 4.3%. Non-farm payrolls fell 92K vs the expected 59K increase.
Market participants are continually attempting to determine what FOMC interest rate policy will be ahead of the next meeting. Any data deviation from expectations can result in short-term market volatility. The weaker employment report adds fuel to the argument that the Fed can cut rates sooner rather than later. The challenge is we are seeing employment weaken along with rising inflation expectations. The war in the Middle East has disrupted a major oil shipping passage and the impact may not be temporary. The Fed is in a precarious position given their dual mandate of stable prices and maximum employment. No rate cut is expected this month. Be cautious with float/lock decision in this time of increased uncertainty.
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