MARKET COMMENT
Mortgage bond prices finished the week near unchanged to slightly higher which put a little downward pressure on rates. The viral outbreak in China continued to dominate headlines. The World Health Organization issued a global health emergency as cases spread internationally despite some restricted travel. The Fed left rates unchanged and reiterated future policy will be data dependent. The data was mixed. New home sales were 694K vs the expected 730K. Durable goods surged higher. Orders rose 2.4% vs the expected 0.4% increase. Consumer confidence was 131.6 versus the expected 128. Q4 GDP rose 2.1% as expected and weekly jobless claims were 216K vs the expected 215K. Income and spending were near estimates and PCE core inflation rose 0.2% vs 0.1%. Mortgage interest rates finished the week near unchanged to better by 1/8 of a discount point.
LOOKING AHEAD
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| ISM Index | Monday, Feb. 3, 10:00 am, et | 48.0 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Factory Orders | Tuesday, Feb. 4, 10:00 am, et | Up 0.7% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| ADP Employment | Wednesday, Feb. 5, 8:30 am, et | 158K | Important. An indication of employment. Weakness may bring lower rates. |
| Weekly Jobless Claims | Thursday, Feb. 6, 8:30 am, et | 210K | Important. An indication of employment. Higher claims may result in lower rates. |
| Preliminary Q4 Productivity | Thursday, Feb. 6, 8:30 am, et | Up 1.2% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Employment | Friday, Feb. 7, 8:30 am, et | 3.5%, Payrolls +156K | Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
FED STATEMENT
“Information received since the Federal Open Market Committee met in December indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a moderate pace, business fixed investment and exports remain weak. On a 12 month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee decided to maintain the target range for the federal funds rate at 1 1/2 to 1-3/4 percent. The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee’s symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate. In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.”
