Market Comment
Mortgage bond prices finished the week higher which helped rates improve slightly. We started the week on a positive note with solid gains Monday afternoon into Tuesday morning. Inflation fears reappeared Wednesday afternoon and Thursday morning which erased a lot of the earlier improvements. The data was mixed. The FHFA house price index rose 1.4% as expected. New home sales were 863K vs 975K. Consumer confidence was 117.2 vs 118.5. Durable goods rose 1% vs 0.8%. Weekly jobless claims were 406K vs 425K. GDP rose 6.4% vs the expected 6.5% increase. Personal income fell 13.1% vs the expected 14.1% decline. Spending rose 0.5% as expected. PCE inflation rose 0.6% as expected. Consumer sentiment was 82.9 vs 83.1. Mortgage interest rates finished the week better by approximately 1/8 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Memorial Day | Monday, May 31 | Important. No trading Monday but there could be volatility the following day as trading resumes after the extended weekend. | |
| ISM Index | Tuesday, June 1, 10:00 am, et | 60.8 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Construction Spending | Tuesday, June 1, 10:00 am, et | Up 1.1% | Low importance. An indication of economic strength. Significant weakness may lead to lower rates. |
| ADP Employment | Thursday, June 3, 8:30 am, et | 545K | Important. An indication of employment. Weakness may bring lower rates. |
| Weekly Jobless Claims | Thursday, June 3, 8:30 am, et | 405K | Important. An indication of employment. Higher claims may result in lower rates. |
| Employment | Friday, June 4, 8:30 am, et | 5.9%, Payrolls +600K | Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| Factory Orders | Friday, June 4, 10:00 am, et | Up 1.3% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
ISM Index
In conducting this survey, the ISM questions purchasing executives from over 250 industrial companies compiling data on production, orders, commodity prices, inventories, vendor performance, and employment. Each of the respondents is asked to rank the categories as “up” or “down.” Various weights are applied to the individual components to form the composite index. A composite index reading of 50 can be thought of as a “swing point.” A reading above50 implies an increase in economic activity, while a reading below 50 indicates a decline. The ISM report is difficult for economists to forecast because there is little data upon which to base an educated guess. The report has a large “surprise factor” and can cause market swings. Be cautious heading into the release.
