The activities start Wednesday with the release of September's Retail Sales report at 8:30 AM ET. This highly important data measures consumer level sales and is very important to the markets because consumer spending makes up over two-thirds of the U.S. economy. If consumer level spending is strong, overall economic growth is likely to be stronger, making bonds less attractive to investors. If we see weaker than expected readings in this report, the bond market should respond favorably and mortgage rates will probably improve. Current forecasts are calling for a 0.3% increase in sales. Good news for the bond market and mortgage pricing would be a much smaller increase.
Also Wednesday, we will get the Fed's Beige Book that summarizes economic activity throughout the country by Federal Reserve region. The Fed relies heavily on this data during their FOMC meetings, so look for a potential reaction during mid-afternoon afternoon trading. It probably will not cause a major sell off in the stock or bond markets, but the 2:00 PM ET release is still worth watching.
September's Housing Starts will be released at 8:30 AM ET Thursday. This Commerce Department report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and future mortgage credit demand by tracking construction starts of new homes but is usually considered to be of low importance to the financial and mortgage markets. It is expected to show a drop in new home starts between August and September. I believe we need to see a significant surprise in this data for it to have an impact on mortgage rates.
Next up is September's Industrial Production data at 9:15 AM ET Thursday. This release will give us an indication of manufacturing strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting it to show a 0.2% decline in output from August's level, meaning that manufacturing activity slipped last month. An increase in production would be negative for bonds and mortgage rates as it would indicate economic strength. A decline in output would be favorable for mortgage shoppers.
The week's calendar closes with September's Leading Economic Indicators (LEI) from the Conference Board late Friday morning. This index attempts to predict future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.1% from August's reading. This would indicate that economic activity is likely to remain fairly calm over the next couple of months. A small increase would not be of much concern to the bond and mortgage market. A large decline would be favorable to mortgage pricing.
Overall, Wednesday is the key day of the week for mortgage rates due to the importance of the retail sales data. Friday will likely be the calmest day for rates. We can expect the bond market to be a bit active Tuesday even though there is no relevant economic data scheduled as this is common following a long holiday. As we saw last week, trade related news can take centerstage at any moment. Therefore, it would be prudent to watch the markets if still floating an interest rate and closing in the near future.
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