MARKET COMMENT
Mortgage bond prices finished the week near unchanged which kept rates steady. Stocks hit record levels. Some analysts attribute the recent tax overhaul as stimulus for growth. The DOW closed above 25000 Thursday. ISM Index was 59.7 versus the expected 58 reading. ADP payrolls rose 250K versus the expected 190K. The signs of strength from the ADP report were countered by the government data which showed weekly jobless claims at 250K versus the expected 240K. Unemployment was 4.1% as expected. Non-farm Payrolls rose 148K. Market participants looked for a 190K increase. Average hourly earnings rose 0.3% as expected. Factory orders rose 1.3% versus the expected 1.3% increase. We ended the week unchanged to better by approximately 1/8 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| 3-year Treasury Note Auction | Tuesday, Jan. 9, 1:15 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| 10-year Treasury Note Auction | Wednesday, Jan. 10, 1:15 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Weekly Jobless Claims | Thursday, Jan. 11, 8:30 am, et |
248K | Important. An indication of employment. Higher claims may result in lower rates. |
| Producer Price Index | Thursday, Jan. 11, 8:30 am, et |
Up 0.3%, Core up 0.2% |
Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates. |
| 30-year Treasury Bond Auction | Thursday, Jan. 11, 1:15 pm, et |
None | Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| Consumer Price Index | Friday, Jan. 12, 8:30 am, et |
Up 0.3%, Core up 0.1% |
Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates. |
| Retail Sales | Friday, Jan. 12, 8:30 am, et |
Up 1.4% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| U of Michigan Consumer Sentiment | Friday, Jan. 12, 10:00 am, et |
96 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
FEDS LOOK TO DATA
The Fed made it clear that future Fed policy and specifically additional rate increases will be implemented as needed in response to future data releases. While there are many market forces that drive mortgage interest rates the Fed remains a primary agent for now. If the Fed is watching the economic data it would be wise to follow their lead.
Economic data often drives trading sentiment in the short-term. A positive or negative release can cause mortgage interest rates to surge higher or lower in a very short time span. Very important releases such as the employment report can set the tone for trading for the month. An absence of data often results in very calm trading.
Data is difficult to predict. Estimates often vary wildly from economist to economist and major revisions are all too common. However, it isn’t difficult to know when an event that can cause market volatility is scheduled. This is crucial in making wise float and lock decisions.
