MIG Market Watch, June 28th 2021
Market Comment
Mortgage bond prices finished the week higher which put downward pressure on rates. Rates improved gradually throughout most of the week until selling pressure emerged Thursday afternoon. The data was mixed. Existing home sales were 5.80M vs 5.65M. New home sales were 769K vs 860K. Durable goods orders rose 2.3% vs the expected 3% increase. Weekly jobless claims were 411K vs 393K. GDP rose 6.4% as expected. Personal income fell 2% vs the expected 2.2% decline. Spending was unchanged vs an expected 0.4% increase. Core PCE prices rose 0.5% vs 0.6%. Consumer sentiment was 85.5 vs 86.4. Mortgage interest rates finished the week better by approximately 3/8 of a discount point.
Looking Ahead
Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
FHFA House Price Index | Tuesday, June 29, 10:00 am, et | Up 1.4% | Moderately Important. A measure of single-family house prices. Weakness may lead to lower rates. |
Consumer Confidence | Tuesday, June 29, 10:00 am, et | 118.9 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
ADP Employment | Wednesday, June 30, 8:30 am, et | 600K | Important. An indication of employment. Weakness may bring lower rates. |
Weekly Jobless Claims | Thursday, July 1, 8:30 am, et | 411K | Important. An indication of employment. Higher claims may result in lower rates. |
ISM Index | Thursday, July 1, 10:00 am, et | 61.5 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
Employment | Friday, July 2, 8:30 am, et | 5.6%, Payrolls +675K | Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
Trade Data | Friday, July 2, 8:30 am, et | $70.8B deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
Factory Orders | Friday, July 2, 10:00 am, et | Up 1.4% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
Factory Orders
Factory orders data is a monthly report released by the US Census Bureau. The release is officially referred to as The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories, and Orders. The manufacturing sector is a major component of the economy. Investors use the factory orders report to attempt to determine the direction of the economy in the future. Orders are generally believed to be a precursor to activity in the manufacturing sector because manufacturing typically has an order before considering an increase in production. Conversely, a decrease in orders eventually causes production to scale back; otherwise, the manufacturer accumulates inventories, which must be financed. Total factory orders break down to approximately 55% durable and 45% non-durable. Durable goods are items such as refrigerators, cars, and aircraft. Non-durables are items such as cigarettes, candy, and soap. Durable goods orders are typically reported a week earlier making a portion of the factory orders data “old news.” However, the orders report provides a more complete picture than the initial durable goods release. Revisions to initial data along with non-durable figures are factored in providing a more accurate look at the condition of the manufacturing sector.