Morning Market Update

Wednesday’s bond market has opened in negative territory with no relevant economic data scheduled for release to continue this week’s rally. The stock markets are showing relatively minor gains with the Dow up 43 points and the Nasdaq up 17 points. The bond market is currently down 16/32, which should push this morning’s mortgage rates higher by approximately .125 - .250 of a discount point. Helping to prevent a larger increase is strength in bonds late yesterday.

We should also be looking for a sizable stock move or major news on the Syria situation to also cause an afternoon change to mortgage rates. If stocks remain near current levels, mortgage rates should follow suit if the Treasury auction shows average demand levels and nothing new breaks on Syria. If stocks continue to move higher, we will probably see bonds pressured and mortgage rates move a little higher later today.

Tomorrow has two reports scheduled for release that have the potential to influence mortgage pricing. The first will be the Labor Department’s weekly unemployment at 8:30 AM ET. It is expected to show that 330,000 new claims for unemployment benefits were filed last week, down from the previous week’s 336,000. The higher the number of initial claims, the better the news it is for mortgage rates because rising claims indicates a weakening employment sector.

The other report is the 2nd Quarter Gross Domestic Product (GDP), also at 8:30 AM ET. The GDP is the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. This reading is the second of three that we see each quarter. Last month's preliminary reading revealed that the economy grew at an annual rate of 1.7%. Tomorrow's revision is expected to show that the GDP actually rose 2.1%, meaning the economy was stronger than thought from April through June. A smaller than expected reading should help lower mortgage rates, especially if the inflation portion of the release does not get revised higher. There will be a final revision issued next month, but it probably will have little impact on mortgage rates since traders will be more interested in the current quarter's activity.

 

I would keep an eye on the market the rest of the day and be prepared to lock. With the data coming out Thursday and Friday we might see a hike in rates as well as the pullback going into a holiday week