Market Comment
Mortgage bond prices finished the week lower which put upward pressure on rates. We saw selling pressure almost every day. The Fed rate hike dominated sentiment throughout most of the week. The data was mixed but generally showed solid economic growth and tame inflation readings. FHFA housing rose 0.7% as expected. Consumer confidence was 117 vs 111.5. Weekly jobless claims were 221K vs 233K. GDP rose 2.4% vs 1.6%. Durable goods rose 4.7% vs 1%. Income rose 0.3% vs 0.5%. Spending was up 0.5% vs 0.4%. PCE Core price rose 0.2% as expected. Employment cost index rose 1% vs 1.1%. Mortgage interest rates finished the week worse by approximately 1/2 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| ISM Index | Tuesday, Aug. 1, 10:00 am, et |
48.5 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Construction Spending | Tuesday, Aug. 1, 10:00 am, et |
Up 0.8% | Low importance. An indication of economic strength. Significant weakness may lead to lower rates. |
| ADP Employment | Wednesday, Aug. 2, 8:15 am, et |
215K | Important. An indication of employment. Weakness may bring lower rates. |
| Preliminary Q2 Productivity | Thursday, Aug. 3, 8:30 am, et |
Up 3.1% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Weekly Jobless Claims | Thursday, Aug. 3, 8:30 am, et |
225K | Important. An indication of employment. Higher claims may result in lower rates. |
| Factory Orders | Thursday, Aug. 3, 10:00 am, et |
Up 0.1% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Employment | Friday, Aug. 4, 8:30 am, et |
3.6%, Payrolls +184K |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
Fed Guidance
The Federal Open Market Committee raised rates 25-basis points last week as expected. Their forward guidance said, “In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”
The Fed’s goal is maximum employment with 2% inflation. Fed Chair Powell expressed sentiments that a “soft landing” may be possible. This means they may be able to reduce inflation without pushing the economy into a recession.
The next Fed meeting is September 20th. That gives us almost 8 weeks of data. Mortgage interest rates are likely to continue their up and down movements until inflation fears subside substantially. A cautious approach to float/lock decisions is prudent in this uncertain environment.
