This week brings us the release of five economic reports that may influence mortgage rates, one of which is arguably the single most important monthly report for the markets. There is data set for release four of the five days, so we can expect to see movement in rates multiple days this week. We are also into corporate earnings season, which can heavily influence stock trading and indirectly bond trading. If earnings reports start to indicate a general consensus of weaker earnings than analysts were expecting, stocks should go into selling mode and bonds could benefit as investors seek the safety of government and mortgage bonds.
The National Association of Realtors will start the week’s activities with the release September’s Existing Home Sales data late Monday morning. This report gives us an indication of housing sector strength and mortgage credit demand by tracking home resales. I don’t see it having much of an influence on the bond market or mortgage rates, but a reading that varies greatly from analysts’ forecasts could lead to a slight change in mortgage pricing. It is expected to show a decline in sales from August to September, meaning the housing sector softened. That would be favorable news for the bond market since a weakening housing sector makes a broader economic recovery less likely and allows bonds to remain appealing to investors.
The Labor Department will post September’s Employment report early Tuesday morning, rescheduled from earlier this month due to the government shutdown. This extremely important report will reveal the U.S. unemployment rate, number of new payrolls added or lost during the month and average hourly earnings. These are considered to be key readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings.
If this report gives us weaker than expected readings, bond prices should move higher and we should see lower mortgage rates Tuesday. Although, it is worth noting that the accuracy of the data is likely to be questioned as a result of the shutdown. However, stronger than forecasted readings would be bad news for the bond market and mortgage rates. Analysts are expecting to see the unemployment rate remain at 7.3%, an increase of 183,000 new jobs from August’s level and a 0.2% increase in earnings.
There is nothing of importance set for release Wednesday and Thursday has only a minor housing report scheduled. That would be September’s New Home Sales at 10:00 AM ET. This data covers the small percentage of home sales that Monday’s Existing Home Sales report didn’t include. It is expected to show an increase in sales of newly constructed homes, but regardless of its results I am not expecting it to have a significant impact on mortgage rates Thursday.
Friday has two pieces of economic data that could affect mortgage rates. The Commerce Department will post Durable Goods Orders for September at 8:30 AM ET. This report gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for an increase in new orders of approximately 3.5%. If we see a much larger increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a significantly weaker than expected reading should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance from forecasts likely will have little impact on Friday’s bond trading or mortgage pricing.
The week’s last report comes just before 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers’ willingness to spend. If consumers are more confident in their own financial and employment situations, they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watch closely. Current forecasts show this index falling from the preliminary reading of 75.2 to 74.5, meaning confidence was not as strong this month as previously thought. That would be good news for mortgage rates.
Overall, Tuesday is the most important day of the week with the almighty Employment report now scheduled. None of the other data set for release is considered key or market-moving, but most of the reports can still affect mortgage rates if they show a noticeable variance from forecasts. Wednesday should be the calmest day unless something unexpected happens. However, stock movement can drive bond trading and impact mortgage rates any day, so please proceed cautiously if still floating an interest rate. Maintaining contact with your mortgage professional would be prudent this week.