MARKET COMMENT
Mortgage bond prices finished the week lower which put upward pressure on rates. We started with sharply higher rates as data showed economic strength. New home sales were 694K versus the expected 631K. Consumer confidence was 128.7. Analysts looked for a reading of 126. The 10Y hit the key psychological 3% mark for the first time since January 2014. Weekly jobless claims were 209K which was the lowest reading since 1969. Durable goods orders rose 2.6% versus the expected 2.3% increase. However, ex-auto orders were unchanged versus an expected 0.7% increase. Q1 Gross Domestic Product rose 2.3% versus the expected 2.1% increase. Employment cost index rose 0.8% which was 0.1% higher than expected. We ended the week worse by 1/8 to 1/4 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Personal Income and Outlays | Monday, April 30, 8:30 am, et |
Up 0.4%, Up 0.1% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core Inflation | Monday, April 30, 8:30 am, et |
Up 0.2% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
| ISM Index | Tuesday, May 1, 10:00 am, et |
59.6 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| ADP Employment | Wednesday, May 2, 8:30 am, et |
242K | Important. An indication of employment. Weakness may bring lower rates. |
| Fed Meeting Adjourns | Wednesday, May 2, 2:15 pm, et |
No rate changes | Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting. |
| Preliminary Q1 Productivity | Thursday, May 3, 8:30 am, et |
Up 0.8% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Trade Data | Thursday, May 3, 8:30 am, et |
$58B deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| Weekly Jobless Claims | Thursday, May 3, 8:30 am, et |
208K | Important. An indication of employment. Higher claims may result in lower rates. |
| Factory Orders | Thursday, May 3, 10:00 am, et |
Up 0.9% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Employment | Friday, May 4, 8:30 am, et |
4.1%, Payrolls +120K |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
JOBS
Keep a sharp eye on the various employment related data this week. Last week’s weekly jobless claims hit levels not seen in over 40 years. The data showed 209,000 new applications for unemployment. Analysts expected a number around 230,000. It is not uncommon for the weekly figures to miss estimates but the sharply lower figure was a very strong indicator that the U.S. economy continued to add jobs. The Fed is clear on their course to raise rates. Strong employment data supports the call for rate hikes sooner rather than later.
