Thursday’s bond market has opened up relatively flat as has the stock markets as traders await this afternoon’s major events. The Dow is currently down 5 points while the Nasdaq is up 1 point. The bond market is currently up 3/32 (2.28%), which should keep this morning’s mortgage rates at yesterday’s levels.
There were two minor pieces of economic data posted early this morning. August’s Housing Starts showed a 3.0% decline in new home groundbreakings compared to the 4.0% decline that was expected. However, a sizable revision to July’s figure skews this month’s results. In addition, this is not a highly influential report, so its results have not had much of an impact on this morning’s trading.
Also released this morning were week’s unemployment numbers. They showed that 264,000 new claims for unemployment benefits were filed last week, down from the previous week’s 275,000 initial filings. Analysts were expecting to see 275,000 last week also. This means the employment sector was a little stronger than thought, making the data slightly negative for bonds and mortgage rates. However, this is only a weekly update and has not played much of a role in today’s mortgage pricing.
This morning may be calm but I highly doubt we will say the same about this afternoon. The FOMC meeting will adjourn at 2:00 PM ET with the traditional post-meeting statement and the Fed’s revised economic projections. There is a high probability of seeing significant volatility in the financial and mortgage markets right after those items are posted. That is when we will learn if the Fed made an increase to key short-term interest rates or decided to wait for a future meeting to do so. They will be followed by a press conference at 2:30 PM with Fed Chair Janet Yellen. It will likely bring more volatility in the markets. In other words, be prepared for an extremely active afternoon.
We will update this report after the markets have an opportunity to react to the afternoon’s events. We generally wait for the initial knee-jerk reaction to pass and the markets to show some stabilization so we have a good idea of what the final reaction is.