Market Comment
Mortgage bond prices finished the week considerably lower which put sharp upward pressure on rates. Rates worsened throughout most of the week but received a much-needed reprieve Thursday afternoon and Friday morning. Elevated oil prices and inflation fears weighed heavily on trading. The data was mixed. FHFA rose 0.8% vs 0.5%. Confidence was103 vs 105.5.New home sales were 675K vs 700K. Durable goods orders rose 0.2% vs down 0.5%. GDP rose 2.1% as expected. Weekly jobless claims 204K vs 215K. Core PCE inflation rose 0.1% vs 0.2%. Consumer sentiment was 68.1 vs 67.7. Mortgage interest rates finished the week worse by approximately 3/8 of a discount point or more.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| ISM Index | Monday, Oct. 2, 10:00 am, et |
47.9 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Construction Spending | Monday, Oct. 2, 10:00 am, et |
Up 0.6% | Low importance. An indication of economic strength. Significant weakness may lead to lower rates. |
| ADP Employment | Wednesday Oct. 4, 8:15 am, et |
140K | Important. An indication of employment. Weakness may bring lower rates. |
| Factory Orders | Wednesday, Oct. 4, 10:00 am, et |
Up 0.2% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Weekly Jobless Claims | Thursday, Oct. 5, 8:30 am, et |
205K | Important. An indication of employment. Higher claims may result in lower rates. |
| Trade Data | Thursday, Oct. 5, 8:30 am, et |
$65.1B deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| Employment | Friday, Oct. 6, 8:30 am, et |
3.7%, Payrolls +158K |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| Consumer Credit | Friday, Oct. 6, 3:00 pm, et |
$12B | Low importance. A significantly large increase may lead to lower mortgage interest rates. |
ISM
The Institute for Supply Management (ISM), formerly the National Association of Purchasing Management (NAPM), releases the “Report on Business” on the first working day of each month. Part of this report is the “diffusion index,” which tracks the economy’s ups and downs well.
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 bethought of as a “swing point.” A reading above 50 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.
