AM Market Update!

Monday’s bond market has opened down slightly with stocks showing early gains and today’s economic data revealing no significant surprises. The Dow is currently up 66 points while the Nasdaq is up 28 points.

The Commerce Department announced early this morning that personal income rose 0.2% last month while spending rose 0.5%. The income reading fell well short of the 0.5% that was expected, meaning consumers earned less money to spend in November than predicted, while the 0.5% increase in spending pegged forecasts. Since consumer spending makes up over two-thirds of our economy, the moderate rise could be considered negative for the bond market. However, since it matched expectations and the weaker than thought income reading is good news, we should consider the data neutral to slightly positive for mortgage rates.

Today’s second relevant economic report was the University of Michigan’s revised Index of Consumer Sentiment for December. They announced late this morning that the December reading remained at 82.5, unchanged from the preliminary estimate. Analysts were expecting to see an upward change, meaning consumers were a little more confident in their own financial situations than previously thought. The weaker than forecasted reading is good news for the bond and mortgage markets because rising confidence usually translates into stronger levels of consumer spending. Although, this is only a moderately important report and it did not show a wide variance from forecasts, so its impact on today’s trading has been minimal.

Tomorrow also has two monthly economic reports scheduled for release that are relevant to mortgage rates. The first will be November's Durable Goods Orders at 8:30 AM ET. This data gives us an important measurement of manufacturing sector strength by tracking orders for big-ticket items or products that are expected to last at least three years such as appliances, airplanes and electronics. Analysts are expecting the report to show a 2.2% rise in new orders. A decline in new orders would indicate that the manufacturing sector was weaker than many had thought. This would be good news for the bond market and should drive mortgage rates lower. However, a much larger jump in orders could lead to mortgage rates moving higher tomorrow. This data is known to be quite volatile from month-to-month though, so it is not unusual to see large headline numbers on this report.

November's New Home Sales data is the second report of the day and the final monthly report we need to watch this week. It will give us a measurement of housing sector strength and mortgage credit demand. It is the sister report of last week's Existing Home Sales report, but covers a much smaller portion of the housing market than that one did. A weakening housing sector is considered good news for the bond market and mortgage rates because broader economic growth is less likely in the immediate future. Since bonds tend to thrive in weaker economic conditions, a large decline would be considered favorable for bond prices and mortgage rates. Current forecasts are calling for a decline in sales of newly constructed homes. Ideally, we would like to see a large drop in sales.

We also have early closings tomorrow that sometimes influence trading. The stock and bond markets will both close early tomorrow ahead of the Christmas Day holiday and will reopen for regular trading hours Thursday. Trading will likely be thin tomorrow, particularly during late morning and early afternoon hours as traders head home for the holiday. It is fairly common for some traders to sell small portions of their holdings before a holiday or long weekend to protect themselves from unforeseen events that may take place while U.S. markets are closed. That is more common on 3-day weekends than just a day-and-a-half holiday, especially when the geo-political and international financial issues seem to be calm. However, the possibility does exist, so minor losses in trading tomorrow morning will not be of much concern.

 

Basically I am saying you should lock your interest rate if you are planning on closing on your mortgage in the next few weeks. For up to day Mortgage News and Real Estate events please follow my BLOG.