Market Comment
Mortgage bond prices finished the week near unchanged which held rates flat. We saw back and forth trading as the data was mixed. New home sales were 661K vs 680K. Consumer confidence was 106.7 vs 115. Durable goods fell 6.1% vs the expected 4.5% decrease. Q4 GDP rose 3.2% vs 3.3%. However, the price component rose 1.7% vs 1.5%. Inflation is the Fed’s primary target and any hints that prices remain elevated does not favor lower rates. Personal income rose 1% vs 0.4%. Spending rose 0.2% as expected. Core PCE rose 0.4% as expected. Weekly jobless claims were 215K vs 210K. ISM Index was 47.8 vs 49.5. Consumer sentiment was 76.9 vs 79.6. Mortgage interest rates finished the week with discount points effectively unchanged.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Factory Orders | Tuesday, March 5, 10:00 am, et | Down 2.8% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| ADP Employment | Wednesday, March 6, 8:15 am, et | 150K | Important. An indication of employment. Weakness may bring lower rates. |
| Fed Testimony | Wednesday, March 6, 10:00 am, et | None | Very Important. The financial markets pay close attention to Fed testimony. Volatility may surround the event. |
| Fed “Beige Book” | Wednesday, March 6, 2:00 pm, et | None | Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates. |
| Weekly Jobless Claims | Thursday, March 7, 8:30 am, et | 215K | Important. An indication of employment. Higher claims may result in lower rates. |
| Trade Data | Thursday, March 7, 8:30 am, et | $63.2B deficit | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| Final Q4 Productivity | Thursday, March 7, 8:30 am, et | Up 3.2% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Employment | Friday, March 8, 8:30 am, et | 3.7%, Payrolls +190K | Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
Fed Testimony
The Fed Chair delivers the Federal Reserve’s semiannual report on monetary policy, familiarly called the Humphrey-Hawkins report, to both the House and Senate Banking Committees in late February/early March and July. The House testimony will start Wednesday this week and will be repeated Thursday in the Senate.
The report is one of the most important speeches given by the Fed Chair and was originally mandated by the Full Employment and Balanced Growth Act. The remarks made to each committee tend to be identical in nature and address basic economic principles. The areas addressed tend to be the overall state of the US economy, recent developments, economic fundamentals, foreign developments, economic outlook, ranges for growth, and concluding remarks. Senator Hubert Humphrey and Representative Augustus Hawkins originally sponsored the legislation in 1977.
There is a potential for market volatility anytime Fed Chair Powell speaks. Exactly what rates will do is unknown, even to Powell. Therefore, a cautious approach to rate decisions is prudent heading into this event.
