Market Comment
Mortgage bond prices finished the week higher which put downward pressure on rates. Tame inflation readings on both the producer and consumer sides led to most of the improvements but not without some volatility surrounding the Fed meeting. The Fed left rates unchanged but signaled a pivot was not on the table in the near term. Consumer prices were unchanged vs up 0.1%. The core, which excludes volatile food and energy prices, rose 0.2% vs 0.3%. Producer prices fell 0.2% vs the expected 0.1% increase. The core was unchanged vs up 0.3%. Weekly jobless claims were 242K vs 225K. Consumer sentiment was 72 vs 65.6. Mortgage interest rates finished the week better by approximately 1/4 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
|---|---|---|---|
| Retail Sales | Tuesday, June 18, 8:30 am, et | Up 0.3% | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Industrial Production | Tuesday, June 18, 9:15 am, et | Up 0.2% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Capacity Utilization | Tuesday, June 18, 9:15 am, et | 78.6% | Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates. |
| NAHB Housing Index | Wednesday, June 19, 10:00 am, et | 46 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Housing Starts | Thursday, June 20, 8:30 am, et | 1.38M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, June 20, 8:30 am, et | 4.5 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Existing Home Sales | Friday, June 21, 10:00 am, et | 4.1M | Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates. |
| Leading Economic Indicatorss | Friday, June 21, 10:00 am, et | Down 0.3% | Important. An indication of future economic activity. Weakness may lead to lower rates. |
Industrial Production
The Federal Reserve releases the Industrial Production report each month. It is a real measure of output from manufacturing, mining, electric, and gas utilities. The data is significant in that it provides an indicator of the state of the economy. Analysts use the data to attempt to determine market direction. The Fed uses the data to help set the course for monetary policy. Generally, the Fed likes to see steady growth in the economy with little price pressures. They signaled to the market for some time that they are data dependent and will continue to keep rates high to fight inflation.
Mortgage interest rates usually react favorably to weaker than expected industrial production data. In times of economic weakness investors often move out of stocks and into mortgage bonds. When things look good investors often move out of bonds and back into stocks.
The Fed remains “data dependent” regarding future rate adjustment policy. A cautious approach to float/lock decisions is prudent heading into economic releases.
