Monday’s bond market has opened up slightly despite early stock strength. The major stock indexes are showing sizable gains with the Dow up 102 points and the Nasdaq up 27 points. The bond market is currently up 3/32 (2.39%), which may improve mortgage pricing slightly but no much from Friday’s morning rates.
The week’s calendar kicked off late this morning with the release of July’s New Home Sales data. The Commerce Department reported that sales of newly constructed homes fell 2.4% last month, falling short of expectations. Analysts were expecting to see an increase in sales, indicating growth in the housing sector. The decline hints at weakness, making the data slightly favorable for bonds and mortgage rates.
The Commerce Department will post July’s Durable Goods Orders early tomorrow morning, giving us an important measure of manufacturing sector strength. This report tracks orders at U.S. factories for big-ticket items, or products that are expected to last three or more years such as appliances, electronics and airplanes. Analysts are expecting to see an increase of approximately 6% in new orders, indicating manufacturing sector strength. This data is known to be quite volatile from month to month, so an increase of this size doesn’t raise too much attention. However, a decent sized decline is good news for the bond market and mortgage rates as it means manufacturing activity is likely softening. A secondary reading the excludes more volatile transportation-related orders is expected to rise 0.5%. The softer the reading, the better the news it is for the bond and mortgage markets.
Tomorrow also has August’s Consumer Confidence Index (CCI) form the Conference Board at 10:00 AM ET. This index measures consumer sentiment about their personal financial situations, which helps us measure consumer willingness to spend. If consumers are feeling more confident in their own finances, they are more apt to make a large purchase in the near future, fueling economic growth. A decline in confidence would indicate that surveyed consumers probably will not be buying something big in the immediate future. That would be a sign of economic weakness and should drive bond prices higher, helping to lower mortgage rates tomorrow. It is expected to show a reading of 88.3, which would be a decline from July’s 90.9. The lower the reading, the better the news it is for bonds and mortgage rates.
Overall, I am expecting to see the most movement in rates tomorrow, but Thursday’s GDP report could be the week’s most important report if it shows a significant revision. Wednesday looks to be the lightest day with nothing of importance scheduled except the moderately important Treasury auction. Even though none of this week’s economic data is considered to be a market mover, we still should see plenty of activity and movement in rates.