Wednesday’s bond market has opened well in positive territory following sizable losses in stocks and weaker than expected results in one of this week’s two key economic reports. The Dow is currently down 163 points while the Nasdaq has lost 45 points. The bond market is currently up 19/32 (2.42%), which should improve this morning’s mortgage rates by approximately .250 of a discount point.
September’s ADP Employment report was posted at 8:15 AM ET this morning, revealing an increase of 213,000 private sector payrolls. This was a little more than the 205,000 that analysts were expecting to see, hinting that the employment sector may be stronger than many had thought. By theory, that makes the data bad news for bonds and mortgage rates. Apparently though, bond traders aren’t too concerned about the news with stocks in selling mode.
The Institute for Supply Management (ISM) announced at 10:00 AM ET that their manufacturing index fell to 56.6 in September. This was nearly two points below latest forecasts and more of a decline from August’s 59.0. That means that fewer surveyed manufacturers felt business improved during September than did in August, making the data clearly positive for bonds and mortgage rates. This data has helped extend this morning’s early bond gains.
Tomorrow has two more pieces of economic data have may have an impact on mortgage rates, but neither is considered to be highly important. The first is the weekly unemployment update that is expected to show 297,000 new claims for unemployment benefits were filed last week. This would be an increase of 4,000 initial claims, indicating the employment sector softened last week. The higher the number of new claims, the better the news it is for mortgage rates. However, since this is only a weekly snapshot of the sector, it usually takes a wide variance from forecasts for it to cause a move in mortgage rates.
Also tomorrow will be August’s Factory Orders data at 10:00 AM ET. This Commerce Department report is similar to last week’s Durable Goods Orders release, but also includes orders for non-durable goods such as food and clothing. It can impact the bond market enough to change mortgage rates if it varies from forecasts by a wide margin. Analysts are forecasting a decline of 9.3% in new orders, meaning manufacturing activity slowed in August. This would be good news for the bond market and mortgage pricing. However, I believe we will need to see a much larger decline for this report to cause a noticeable improvement in rates, partly because the data is skewed from a large spike in airplane orders during July.