Tuesday’s bond market has opened in positive territory despite stronger than expected economic news. The stock markets are showing moderate losses with the Dow down 57 points and the Nasdaq down 17 points. The bond market is currently up 4/32, but due to weakness yesterday afternoon, we should see little change in this morning’s mortgage rates.
There were three pieces of economic data posted this morning. The first was April’s Consumer Price Index (CPI) at 8:30 AM ET. It showed a 0.4% increase in the overall reading a 0.2% rise in the more important core data. The increase in the overall reading slightly exceeded forecasts but the core reading pegged expectations. Therefore, we can consider the data neutral to slightly negative for bonds and mortgage rates.
April’s Housing Starts was also posted early this morning. The Commerce Department announced a 6.6% jump in new home groundbreakings. This was a larger than expected rise, hinting at housing strength. Fortunately, this is not considered to be a highly important report and has had a minimal impact on today’s trading.
The third piece and final report of the morning was April’s Industrial Production report at 9:15 AM ET. It showed a 0.7% increase in output at U.S. factories, mines and utilities, exceeding forecasts of a 0.2% rise. This news indicates that the manufacturing sector may be gaining strength, making the report bad news for mortgage rates. However, since this report is considered to be only moderately important, it apparently has also had little influence on this morning’s rates.
There is no relevant economic data set for release tomorrow morning, but the afternoon brings us the minutes of the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation or concerns about economic growth. The goal is to form opinions about the Fed’s next move regarding interest rates, which is expected to happen sometime a couple times before the end of the year. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading tomorrow.