25
Jul
Market Comment
Mortgage bond prices finished the week higher which helped rates improve. Trading remained volatile but most of the movement was positive. Tame oil prices tied to increased foreign production and decreased US demand tempered some of the recent inflation fears. The Fed continued their MBS reinvestments which also helped rates. Most of the data showed economic weakness. NAHB housing was 55 vs 65. Existing home sales were 5.12M vs 5.35M. Weekly jobless claims were 251K vs 247K. The Philadelphia Fed index was negative 12.3 vs negative 1.2. Leading economic indicators fell 0.8% vs the expected 0.3% decline. Housing starts were 1559K vs 1550K. Mortgage interest rates finished the week better by approximately 3/4 to 7/8 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| FHFA House Price Index | Tuesday, July 26, 10:00 am, et |
Up 1.4% | Moderately Important. A measure of single-family house prices. Weakness may lead to lower rates. |
| Consumer Confidence | Tuesday, July 26, 10:00 am, et |
97.5 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| New Home Sales | Tuesday, July 26, 10:00 am, et |
700K | Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| Durable Goods Orders | Wednesday, July 27, 8:30 am, et |
Down 0.3% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| Fed Meeting Adjourns | Wednesday, July 27, 2:15 pm, et |
75 basis point hike | Important. Most expect the Fed to change rates. Volatility may surround the adjournment of this meeting. |
| Q2 GDP | Thursday, July 28, 8:30 am, et |
Down 0.2% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Weekly Jobless Claims | Thursday, July 28, 8:30 am, et |
235K | Important. An indication of employment. Higher claims may result in lower rates. |
| Q2 Employment Cost Index | Friday, July 29, 8:30 am, et |
Up 1.2% | Very important. A measure of wage inflation. Weakness may lead to lower rates. |
| PCE Core Inflation | Friday, July 29, 8:30 am, et |
Up 0.4% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
GDP and Recession
There are several definitions of recession. Financial publications often define it as two consecutive quarters of decline in quarterly real gross domestic product. Economists use monthly business cycles to define periods of expansion and contraction.
There is considerable debate about the Fed’s ability to raise rates without tipping the economy into recession. This week’s GDP release will give a very important look at where the economy stands. Real GDP in the first quarter fell 1.6%. A decline in the second quarter number this week will signal recession with our first definition above. Be cautious heading into the events this week as volatility is likely.
