Market Commentary

Updated on October 17, 2018 10:23:49 AM EDT

The Commerce Department reported early this morning that new home groundbreakings fell 5.3% last month. This was a larger decline than was expected, indicating weakness in the new home portion of the housing sector. That makes the data favorable for bonds and mortgage rates as it is a sign of economic weakness. However, this report does not carry a high level of importance, so it has had a minimal impact on today's trading.

We also have the release of the minutes from last month's FOMC meeting to watch this afternoon. These may move the markets or could be a non-factor, depending on what they show. The key points traders are looking for are concerns over economic growth here and globally, inflation and the Fed's next monetary policy move (rate hike). It is worth noting though that the last FOMC meeting was followed by revised economic predictions and a press conference with Fed Chair Powell. Therefore, the likelihood of seeing a significant surprise in the minutes is relatively low. The minutes will be released at 2:00 PM ET, meaning of there is a reaction in the markets it will come mid-afternoon.

Tomorrow has two minor pieces of economic data set for release. The first will be last week's unemployment update at 8:30 AM ET. It is expected to show that 212,000 new claims for unemployment benefits were filed last week, down slightly from the previous week's 214,000. Because rising claims is a sign of a weakening housing sector, the higher the number in this report, the better the news it is for mortgage rates. That said, since this is only a weekly snapshot, it takes a wide variance from forecasts for the data to directly influence mortgage pricing.

September's Leading Economic Indicators (LEI) will be released at 10:00 AM ET tomorrow. This Conference Board index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.5% from August's reading. This would indicate that economic activity is likely to grow fairly rapidly 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 for mortgage shoppers.

 ©Mortgage Commentary 2018

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