Market Comment
Mortgage bond prices finished the week lower which put upward pressure on rates. We started the week positively, saw mild selling pressure mid-week, and ended on a sharply negative note. Unfortunately, the early positive movements were not enough to counter the losses seen Friday morning. The data was mixed but the higher-than-expected producer inflation readings led to the most selling pressure. Producer prices rose 0.3% vs 0.2%. The core rose 0.3% vs 0.2%. The trade balance was -$65.5B vs -$66B. CPI rose 0.2% as expected. The core also rose 0.2% as expected. Weekly jobless claims were 248K vs 230K. 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 |
| Retail Sales | Tuesday, Aug. 15, 8:30 am, et |
Up 0.4% | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Housing Starts | Wednesday, Aug. 16, 8:30 am, et |
1.44M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Industrial Production | Wednesday, Aug. 16, 9:15 am, et |
Up 0.3% | Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization | Wednesday, Aug. 16, 9:15 am, et |
79.2% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| Fed Minutes | Wednesday, Aug. 16, 2:00 pm, et |
None | Important. Details of the last Fed meeting will be thoroughly analyzed. |
| Weekly Jobless Claims | Thursday, Aug. 17, 8:30 am, et |
231K | Important. An indication of employment. Higher claims may result in lower rates. |
| Philadelphia Fed Survey | Thursday, Aug. 17, 10:00 am, et |
27.5 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Leading Economic Indicators | Thursday, Aug. 17, 10:00 am, et |
Down 0.2% | Important. An indication of future economic activity. A smaller increase may lead to lower rates. |
Fuel Price Pressures
Rising fuel prices continue to pressure consumers and businesses which impacts the entire economy. Every item that is shipped or trucked is impacted by the cost of diesel. The US Energy Information Administration (EIA) reported August 7th that regular gasoline prices averaged $3.60 per gallon. The West Coast had the highest prices at $4.54 per gallon. U.S. On-Highway Diesel Fuel Prices averaged $3.91 per gallon while many areas peaked near $5 per gallon. The price of gasoline is composed of 47% crude oil, 24% refining, 14% distribution and marketing, and 14% taxes. The diesel breakdown is slightly different at 44% crude oil, 18% refining, 22% distributions and marketing, and 15% taxes.
The EIA notes, “Crude oil prices have increased since June, primarily because of extended voluntary cuts to Saudi Arabia’s crude oil production and increasing global demand. We expect these factors will continue to reduce global oil inventories and put upward pressure on oil prices in the coming months.”
