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MIG Market Watch, July 1st, 2019

MIG Market Watch, July 1st, 2019


MIG Market Watch, July 1st, 2019

MARKET COMMENT

Mortgage bond prices finished the week a little lower which put some upward pressure on rates.  We started the week on a slightly negative note amid no data Monday.  The weaker than expected consumer confidence report Tuesday helped temper some of the losses.  Confidence stood at 121.5 versus an expected reading of 132.  New home sales were in line with estimates.  Durable goods orders fell 1.3% versus an expected 0.3% decline.  Weekly jobless claims were a higher than expected 227K.  The final revision to Q1 gross domestic product showed the economy grew at a 3.1% pace.  Income rose 0.5%, outlays rose 0.4%, and PCE inflation rose 0.2%.  Consumer sentiment printed at 98.2.

Mortgage interest rates finished the week near unchanged to worse by approximately 1/8 of a discount point.

LOOKING AHEAD

Economic Indicator Release Date & Time Consensus Estimate Analysis
ISM Index Monday, July 1,
10:00 am, et
52.2 Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, July 3,
8:30 am, et
88K Important.  An indication of employment.  Weakness may bring lower rates.
Trade Data Wednesday, July 3,
8:30 am, et
$51B deficit Important.  Affects the value of the dollar.  A falling deficit may strengthen the dollar and lead to lower rates.
Weekly Jobless Claims Wednesday, July 3,
8:30 am, et
215K Important.  An indication of employment.   Higher claims may result in lower rates.
Factory Orders Wednesday, July 3,
10:00 am, et
Down 0.2% Important.  A measure of manufacturing sector strength. Weakness may lead to lower rates.
Employment Friday, July 5,
8:30 am, et
3.6%,
Payrolls +115K
Very important.  An increase in unemployment or weakness in payrolls may bring lower rates.

 

 

 

Factory Orders

Factory orders data is a monthly report released by the US Census Bureau.  The release is officially referred to as The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories, and Orders.

The manufacturing sector is a major component of the economy.  Investors use the factory orders report to attempt to determine the direction of the economy in the future.  Orders are generally believed to be a precursor to activity in the manufacturing sector because manufacturing typically has an order before considering an increase in production.  Conversely, a decrease in orders eventually causes production to scale back; otherwise, the manufacturer accumulates inventories, which must be financed.

Total factory orders break down to approximately 55% durable and 45% non-durable.  Durable goods are items such as refrigerators, cars, and aircraft.  Non-durables are items such as cigarettes, candy, and soap.  The report is often dismissed due to the timing of the release.  Durable goods orders are typically reported a week earlier making a portion of the factory orders data “old news.”  While some analysts dismiss the value of the factory orders data others point out the fact that the report provides a more complete picture than the initial durable goods release. Revisions to initial data along with non-durable figures are factored in providing a more accurate look at the condition of the manufacturing sector.

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