Friday’s bond market is in positive territory after today’s only relevant economic data showed weaker than expected results. The stock markets are extending Wednesday’s selling that had the Dow close with a 160 point loss. This morning’s losses are much smaller with the Dow down 5 points and the Nasdaq down 28 points. The bond market is currently up 19/32 (2.10%), which should improve this morning’s mortgage rates by approximately .250 of a discount point.
This morning did have a pretty significant piece of economic data for the markets to digest. At 10:00 AM ET, the Institute for Supply Management (ISM) posted their manufacturing index for December. They announced a reading of 55.5 that fell short of analysts’ expectations, indicating manufacturer sentiment about current business conditions was softer than many had thought. That is very good news for the bond market and mortgage rates because weaker business activity makes long-term securities such as mortgage-related bonds more attractive to investors.
Today’s early bond market reaction to the data seems a little more than it normally would. That is likely because of thinner trading as some market participants may still be home for the long holiday weekend. Fortunately, the data was favorable so we can’t really complain about the overreaction. Still, we can expect more activity early next week that could correct today’s excessive move.
Next week doesn’t brings us a high number of relevant economic releases, but the list does include the FOMC meeting minutes and the almighty monthly Employment report. There is nothing scheduled for release Monday that we need to be concerned with. In fact, the most important events are set for the latter half of the week. Look for details on next week’s calendar in Sunday evening’s weekly preview.