Thursday’s bond market initially opened flat before moving into positive territory once stocks opened for trading. The major stock indexes are showing early weakness with the Dow down 81 points and the Nasdaq down 6 points. The bond market is currently up 6/32 (2.26%), which may slightly improve this morning’s mortgage rates from yesterday’s morning pricing.
The Fed Beige Book that was released yesterday afternoon showed no significant surprises or changes from the last update. It showed moderate economic growth with subdued inflation for the most part. There wasn’t much in the report to get overly excited or concerned about, preventing bonds from reacting to it enough to affect mortgage rates.
Last week’s unemployment figures were today’s only economic data. They showed that 297,000 new claims for unemployment benefits were filed last week, down from the previous week’s revised 314,000 initial claims. That is a sign that the employment sector strengthened last week, but because it was close to the 295,000 that was forecasted, we have seen little reaction to the data in this morning’s bond trading and mortgage pricing.
Tomorrow has two economic reports that we will be watching, but one is much more important to the markets than the other. The extremely important data is November’s Employment report from the Labor Department at 8:30 AM ET. This is arguably the most important monthly report we see, so its impact on the markets and mortgage rates is often significant. The most watched readings within the report are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate of 5.8% while 229,000 new jobs were added to the economy. The income reading is forecasted to show an increase of 0.2%. An ideal scenario for mortgage shoppers would be a higher unemployment rate, a much smaller increase in payrolls (or a decline) and no change in the earnings reading. If we are fortunate enough to hit the trifecta with all three, we should see the stock markets fall, bond prices rise significantly and mortgage rates move much lower tomorrow. However, stronger than expected readings would likely fuel a stock rally and bond sell-off that would lead to higher mortgage rates.
October’s Factory Orders report will close the week’s activities at 10:00 AM ET tomorrow morning. This report is similar to the Durable Goods Orders report that was released last week, except this one includes manufacturing orders for both durable and non-durable goods. This data usually doesn’t have a significant influence on bond trading, particularly when following a major event such as the Employment report. Analysts are expecting to see a 0.2% increase in new orders. The weaker the number, the better the news for bond prices and mortgage rates because it would signal manufacturing sector weakness, but because this release follows the almighty Employment report, I don’t see it having much of an influence on tomorrow’s rates.