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Market
Comment
Mortgage bond prices finished the week nearly unchanged, which held rates flat. Rates worsened Monday, recovered the losses and more Thursday, and ended on a negative note Friday. Inflation, oil prices, and Middle East uncertainty continued to factor into trading. The data was mixed with some signs of economic weakness. Weekly ADP employment was 8.25K vs 15K. Existing home sales were 4.06M vs 4.05M. Consumer prices rose 0.1% as expected. The Core was up 0.2% as expected. Producer prices were unchanged vs up 0.2%. The Core was up 0.2% vs 0.3%. Weekly jobless claims were 209K vs 202K. Retail sales fell 0.6% vs the expected 0.1% increase. Consumer sentiment was 51 vs 54.5. Mortgage interest rates finished the week with discount points near unchanged.
LOOKING
AHEAD
|
Economic
Indicator |
Release
Date &
Time |
Consensus
Estimate |
Analysis
|
| NAHB Housing Index |
Monday, Aug. 17,
10:00 am, et
|
33
|
Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates.
|
| Housing Starts |
Tuesday, Aug. 18,
8:30 am, et
|
1.35M
|
Important. A measure of housing sector strength. Weakness may lead to lower rates.
|
| Industrial Production |
Tuesday, Aug. 18,
9:15 am, et
|
Up 0.3%
|
Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.
|
| Capacity Utilization |
Tuesday, Aug. 18,
9:15 am, et
|
76.3%
|
Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates.
|
| Fed Minutes |
Wednesday, Aug. 19,
2:00 pm, et
|
None
|
Important. Details of the last Fed meeting will be thoroughly analyzed.
|
| Weekly Jobless Claims |
Thursday, Aug. 20,
8:30 am, et
|
210K
|
Important. An indication of employment. Higher claims may result in lower rates.
|
| Philadelphia Fed Survey |
Thursday, Aug. 20,
10:00 am, et
|
25.3
|
Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
|
| Leading Economic Indicators |
Thursday, Aug. 20,
10:00 am, et
|
Up 0.1%
|
Important. An indication of future economic activity. A smaller increase may lead to lower rates.
|
Industrial Production
The Federal Reserve releases the Industrial Production report each month. It is a real measure of output from manufacturing, mining, electric, and gas utilities. The data is significant in that it provides an indicator of the state of the economy. Analysts use the data to attempt to determine market direction. The Fed uses the data to help set the course for monetary policy. Generally, the Fed likes to see steady growth in the economy with little price pressures. They signaled to the market for some time that they are data dependent and will continue to keep rates high to fight inflation.
Mortgage interest rates usually react favorably to weaker than expected industrial production data. In times of economic weakness investors often move out of stocks and into mortgage bonds. When things look good investors often move out of bonds and back into stocks.
The Fed remains “data dependent” regarding future rate adjustment policy. A cautious approach to float/lock decisions is prudent heading into economic releases.
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