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Wednesday’s bond market has opened up slightly even though stocks are showing sizable gains. The Dow is currently up 98 points while the Nasdaq has gained 7 points. The bond market is currently up 3/32, but we should still see an increase of approximately .125 of a discount point in this morning’s mortgage rates due to weakness in trading late yesterday.
Today’s only relevant economic data came from the Conference Board late this morning. They said that their Leading Economic Indicators (LEI) for September rose 0.7%, slightly exceeding forecasts of 0.6%. That indicates that the indicators are predicting a decent sized rate of economic growth over the next several months, making the data negative for the bond market and mortgage rates. However, this was a minor variance in a moderately important report, so its impact on today’s trading and mortgage pricing has been minimal.
There are two pieces of economic data scheduled for release at 8:30 AM ET tomorrow with one of them much more important to the markets than the other. The key data is the preliminary reading of the 3rd Quarter Gross Domestic Product (GDP). The GDP is considered to be the benchmark measurement of economic growth because it is the total of all goods and services produced in the U.S. and therefore is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Tomorrow’s release is the first and usually has the biggest impact on the markets. Current forecasts call for an increase of approximately 1.9% in the GDP, which would mean that the economy grew at a noticeably slower pace than the 2nd quarter’s 2.5% annual rate. If this report shows a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a larger than expected rise could lead to a rally in stocks, bond selling and a sizable increase in tomorrow’s mortgage rates.
The second report of the day will come from the Labor Department, who will post last week’s unemployment figures. They are expected to announce that 335,000 new claims for unemployment benefits were filed last week, down from the previous week’s 340,000 initial claims. The higher the number of new claims, the better the news it is for the bond market and mortgage pricing since rising claims indicates a weakening employment sector. However, the GDP reading will be the focus of tomorrow’s trading. Unless we see a significant variance from forecasts in the unemployment figures, they will likely have a minimal impact on mortgage rates.