June 28th, 2009 10:49 PM by Lehel Szucs
This week brings us the release of only four economic reports for the markets to digest, but three of them are considered to be important and one of those three is arguably the most influential report we see each month. In addition, those four reports are being released over just three trading days. There is no relevant data scheduled for release tomorrow and the markets are closed Friday in observance of the Independence Day holiday, leaving the middle calendar days the focus of the week.
June's Consumer Confidence Index (CCI) is the first report of the week. It will be posted late Tuesday morning. It is important to the financial markets because it measures consumer willingness to spend, which is important because consumer spending makes up two-thirds of the U.S. economy. If it shows a sizable increase in confidence from last month, we can expect to see the bond market falter and mortgage rates rise slightly. Current forecasts are calling for a reading o f 55.1, up slightly from last month's 54.9 reading.
The Institute of Supply Management (ISM) will release their manufacturing index for June late Wednesday morning. This index measures manufacturer sentiment by surveying trade executives on current business conditions. A reading below 50 means that more surveyed executives felt business worsened in the month than those who felt it had improved. Analysts are expecting a reading of 44.0. That would indicate that manufacturers felt business improved slightly from the previous month. Good news for bonds and mortgage rates would be a weaker than expected reading.
The remaining two reports will be released Thursday morning. The Labor Department will post June's unemployment rate, number of new payrolls added and average hourly earnings early Thursday. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, a large decline in payrolls and no change in earnings. Weaker than expected readings would likely help boost bond prices and lower mortgage rates Thursday. However, stronger than expected readings could be extremely detrimental for mortgage pricing. Analysts are expecting to see the unemployment rate rise 0.2% to 9.6%, while 370,000 jobs were lost and a 0.2% rise in earnings.
The Commerce Department will post May's Factory Orders data late Thursday morning, which is similar to the Durable Goods Orders report that was released last week. The biggest difference is that this week's report covers both durable and non-durable goods. It usually doesn't have as much of an impact on the bond market as the durable goods data does, but can lead to changes in mortgage pricing if it varies greatly from forecasts. Current expectations are showing a 0.2% rise in new orders from April's levels. A smaller than expected rise in orders would be consi dered good news for the bond market and could help lower mortgage rates slightly Thursday. However, the employment data is much more important to the markets than this report is.
Overall, Tuesday and Wednesday's data should bring some volatility in trading and mortgage rates, but Thursday's Employment report is definitely the most important of the week. Its impact can single handily lead to an improvement or increase in mortgage rates for the week. There is no early close for the bond market Thursday as previous years, but it will probably be a light afternoon in trading as traders head home for the long weekend. This could lead to additional volatility during morning trading, so I strongly recommend that you maintain contact with your mortgage professional if still floating an interest rate.
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... Float 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.
©Mortgage Commentary 2009