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Monday’s bond market has opened in positive territory following weaker than expected economic data. The stock markets are showing fairly sizable losses with the Dow down 108 points and the Nasdaq down 32 points. The bond market is currently up 10/32, which should improve this morning’s mortgage rates by approximately .125 – .250 of a discount point over Friday’s morning pricing.
The week kicked off late this morning with the release of the Institute of Supply Management’s (ISM) manufacturing index for January. This very import index tracks manufacturer sentiment by rating surveyed trade executives’ opinions of business conditions during the month. It is usually the first economic data released each month covering the preceding month, so it is looked at closely for initial signs of sector strength or weakness. Today’s release revealed a reading of 51.3 that was well below forecasts of a 56.3 reading. That makes the data very favorable for the bond market and mortgage rates because it points towards a softening manufacturing sector. It is worth noting that some analysts are pointing towards bad weather as the cause for the drop, saying this is only a temporary setback. There are some tidbits of info in the data that would support that theory, but they don’t seem to be given much weight in this morning’s trading, to the benefit of mortga! ge shoppers.
The rest of the week has four more reports that we traditionally consider fairly relevant to mortgage rates. The next is December’s Factory Orders data at10:00 AM ET tomorrow. It is similar to last week’s Durable Goods Orders release in giving us a measurement of manufacturing sector strength, but this data includes new orders for both durable and non-durable goods. It is not one of the more important reports we get each month, however, it can influence mortgage pricing if it varies greatly from forecasts. Analysts are expecting a 1.7% decline in new orders, indicating a softening manufacturing sector. The bond market would like to see a larger decline, meaning that manufacturing activity was weaker than many had thought.
Overall, Friday is the best candidate for most important day of the week due to the release of the almighty monthly Employment report. The calmest day will probably be Wednesday unless the ADP report takes headlines with a surprisingly weak or strong payroll number, causing a knee-jerk reaction in the financial and mortgage markets.