November 2nd, 2009 7:41 AM by Lehel S.
This week brings us the release of four relevant economic reports for the markets to digest with two of those reports being much more important than the other two. In addition to the factual reports, we also have another FOMC meeting to work around this week. This leads me to believe that we will see another active week for mortgage rates.
The first report comes late tomorrow morning when the Institute for Supply Management (ISM) will post their manufacturing index. The index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength. It is considered to be one of the more important reports we see each month. Tomorrow's release is expected to show a reading of 53.0, meaning that sentiment increased slightly from September's level. A smaller than expected reading would be good news for bonds and likely lead to lower mortgage rates tomorrow.
Tuesday's only relevant ne ws is September's Factory Orders report. This report is similar to last week's Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show 0.9% increase in new orders from August's level. A smaller than forecasted increase would be good news for the bond market and mortgage rates while a larger than expected rise is bad news and should push rates higher.
There is no important data scheduled for release Wednesday. However, this week's FOMC meeting is a two-day meeting that begins Tuesday and adjourns Wednesday afternoon. There is almost no possibility of the Fed raising key short-term interest rates this week. But market participants will be looking at the post-meeting statement for any indication of when the Fed may make a move. The meeting will adjourn at 2:15 PM ET Wednesday, so look for any reaction to the statement to come during afternoon hours. Generally speaking, any hint of a rate increase coming relatively soon would be negative news for bonds and lead to higher mortgage rates.
Thursday's report is the 3rd Quarter Productivity reading. The productivity index is expected to show a level of worker productivity during the third quarter equivalent to last quarter's final reading of 6.6%. Analysts have forecasted a 6.4% rise in worker output. A larger increase would be good news for the bond market because high levels of productivity allows the economy to expand without inflationary pressures being a concern.
The last report of the week is the most important. Friday brings us the release of one of the most important monthly reports- the Employment report. The Labor Department will post October's employment stats early Friday morning. The report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for a 0.1% rise in unemployment to bring the national rate to 9.9%, a drop in payrolls of approximately 175,000 and a 0.1% increase in average earnings. Weaker than expected readings should rally bonds and lead to improvements in mortgage rates, especially if the stock markets react poorly to the news.
Overall, the single most important day is Friday but tomorrow's data is also considered to be highly important. In addition to the economic reports and the FOMC meeting, I believe stocks will continue to experience volatility that will also impact bond trading. The key to the week will be Friday's employment numbers, but any significant swings in the stock markets may also influence whether mortgage rates close the week higher or lower than tomorrow morning's levels.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.