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

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.