MARKET COMMENT
Mortgage bond prices finished the week lower which put upward pressure on rates. Stocks showed positive movements prior to and after the Tuesday elections and MBS prices were lower. The Treasury auctions early in the week were generally lackluster. The Fed left rates unchanged but said the labor market was strong, inflation remained near 2%, and noted that further gradual rate hikes were likely in the short term. Inflation pressures increased. The producer price index rose 0.6% versus the expected 0.2% increase. The core, which excludes volatile food and energy prices, rose 0.5% versus an expected 0.2% increase. University of Michigan consumer sentiment came in at 98.3 which was close to expected. Mortgage interest rates finished the week worse by 1/8 to 1/4 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Consumer Price Index | Wednesday, Nov. 14, 8:30 am, et |
Up 0.2%, Core up 0.1% |
Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates. |
| Retail Sales | Thursday, Nov. 15, 8:30 am, et |
Up 0.5% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| Weekly Jobless Claims | Thursday, Nov. 15, 8:30 am, et |
214K | Important. An indication of employment. Higher claims may result in lower rates. |
| Philadelphia Fed Survey | Thursday, Nov. 15, 10:00 am, et |
6.8 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Business Inventories | Thursday, Nov. 15, 10:00 am, et |
Up 0.4% | Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates. |
| Industrial Production | Friday, Nov. 16, 9:15 am, et |
Up 0.4% | Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization | Friday, Nov. 16, 9:15 am, et |
78.1% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
INDUSTRIAL PRODUCTION
The Federal Reserve releases the Industrial Production report each month. It is a real measure of output from manufacturing, mining, electric, and gas utilities. The data is significant in that it provides an indicator of the state of the economy. Analysts use the data to attempt to determine market direction. The Fed uses the data to help set the course for monetary policy. Generally, the Fed likes to see steady growth in the economy with little price pressures. They signaled to the market for some time that they are data dependent and will continue to raise rates gradually in the future if economic strengthening continues.
Mortgage interest rates usually react favorably to weaker than expected industrial production data. In times of economic weakness investors often move out of stocks and into mortgage bonds. When things look good investors often move out of bonds and back into stocks. We have seen these patterns frequently in recent months.
Floating into significant economic data always has some risk involved. Now is a great time to take advantage of mortgage interest rates at these historically favorable levels.
