Monday’s bond market has opened in negative territory despite favorable economic data stocks showing losses also. The major stock indexes are starting the week in negative ground with the Dow down 58 points and the Nasdaq down 26 points. The bond market is currently down 15/32 (1.68%), but due to strength late Friday, we likely will see little change to this morning’s mortgage rates if comparing to Friday’s early pricing. However, I would not be surprised to see upward revisions to mortgage rates sometime today unless bonds move into positive ground.
This morning had two pieces of economic data that were relevant to the mortgage market. The first report was December’s Personal Income and Outlays data at 8:30 AM ET. It showed a 0.3% increase in income and a 0.3% decline in spending. The income reading matched forecasts while the drop in spending was a little more than expected. Because consumer spending makes up a significant portion of the U.S. economy and slowing spending means weaker economic growth, we can consider this news neutral to slightly favorable for bonds and mortgage rates.
The Institute of Supply Management (ISM) posted their manufacturing index for January at 10:00 AM ET today. This index tracks manufacturer sentiment by rating surveyed trade executives’ opinions of business conditions. It came in at 53.5, falling short of the 54.7 that was expected and down from December’s revised 55.1. That means fewer surveyed manufacturing executives felt business improved during the month than did in December. This is a sign of manufacturing sector weakness, so we can consider the data good news for the bond and mortgage markets.
December’s Factory Orders data at 10:00 AM ET is the only economic data we need to watch 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 2.0% 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 easily the best candidate for most important day of the week due to the release of January’s monthly Employment report. The calmest day will probably be Thursday. I am fully expecting to see another very active week for mortgage rates, so please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.