SUNDAY,  APR 14th, 2024
Weekly Preview

This week brings us the release of five monthly economic reports that we need to be concerned with, in addition to a Treasury auction midweek and the Fed Beige Book. There are also quite a few Fed speaking engagements, corporate earnings news and other factors to watch this week.

Unlike most Mondays, we have a major economic report being released early tomorrow morning. Starting this week’s scheduled activities will be March’s Retail Sales report that tracks consumer spending in the U.S. This category makes up over two-thirds of the U.S. economy, so tomorrow’s results can be highly influential on the financial markets and mortgage rates. Forecasts have sales rising 0.3% with a 0.4% increase if more volatile and costly auto transactions are excluded. Larger than expected increases would be bad news for mortgage rates because it would signal stronger economic activity.

The escalation of conflict in the Middle East should also have an impact on the markets tomorrow, if not longer. Iran’s retaliatory attack on Israel over the weekend builds further pressure in the region that will likely cause volatility in the global markets. Geopolitical issues often tend to favor bonds and mortgage rates as investors shift funds into U.S. securities as a safe haven. However, the Middle East is a bit more complicated due to rising oil prices. As tensions rise in the region, oil prices tend to spike higher. This fuels inflationary concerns in the U.S., which are already an issue for the Fed. Therefore, there is no clear prediction on how the conflict will impact mortgage rates this week. We will be watching the situation closely and will address it in our updates accordingly.

Tuesday has two pieces of data scheduled, neither of which are expected to cause a big move in the markets. March’s Housing Starts report will be the first, coming at 8:30 AM ET. This data tracks groundbreakings of new home construction and gives us a measurement of housing sector strength. The report is expected to show a decline in new starts last month, indicating a bit of weakness in the new home portion of the housing sector. Good news for rates would be a sizable decline, but this data doesn’t draw a high level of interest. It will take a large variance from forecasts to have a noticeable impact on mortgage pricing.

March’s Industrial Production data at 9:15 AM ET is Tuesday’s second release. It tracks output at U.S. factories, mines and utilities, translating into a sign of manufacturing sector strength. Analysts are predicting a 0.4% rise in production, hinting at strength in manufacturing. This data is considered to be only moderately important for the markets though. Weaker manufacturing activity is favorable news for mortgage rates.

Wednesday doesn’t have any relevant economic releases scheduled, but has two afternoon events that may have a minor impact on rates. The first afternoon event is the 1:00 PM ET results of the 20-year Treasury Note auction taking place that day. These types of sales don’t directly affect mortgage rates, although they can impact broader bond trading sentiment that has the potential to indirectly move rates slightly. A strong demand from investors could lead to bond gains and a minor improvement in mortgage pricing Wednesday afternoon. On the other hand, a weak interest in the securities may cause some pressure in bonds during afternoon trading and potentially, mortgage rates.

The Federal Reserve’s Beige Book report will be posted at 2:00 PM ET Wednesday. It is named simply after the color of its cover but provides opinion from business contacts on economic conditions throughout the U.S. by Fed region. Since the Fed relies heavily on the contents of this report during their FOMC meetings, its results can have a moderate impact on the financial markets and mortgage rates if it reveals a significant surprise. If there is a reaction, it will come during mid-afternoon trading Wednesday.

Thursday has two late morning reports, one being March’s Existing Homes Sales numbers from the National Association of Realtors. It gives us another indication of housing sector strength and mortgage credit demand and can influence mortgage pricing if it shows a sizable variance from forecasts. Ideally, the bond market would like to see a large decline in home resales because a softening housing sector makes broader economic growth more difficult. Analysts are expecting to see a decrease in sales between February and March. The larger the decline, the better the news it is for bonds and mortgage rates.

Leading Economic Indicators (LEI) for March will close out this week’s economic releases, also at 10:00 AM ET Thursday. This Conference Board index attempts to predict economic activity over the next three to six months. Analysts consider it to be only a moderately important report, so at best we can expect to see a slight movement in rates as a result of this data. The report is expected to show no change from February’s reading, indicating economic activity will be flat over the next several months. Favorable news for mortgage rates would be a large decline.

Also worth noting is a slew of corporate earnings releases as the traditional reporting season kicks into high gear. There are several big-named banks and other companies announcing results and forward guidance this week. Generally speaking, bad news for stocks often leads to bond gains and lower mortgage rates. They are scheduled throughout the week, mostly before the markets open or after they close. This means we can see influence on bond trading multiple days.

Overall, tomorrow looks to be the most important day for mortgage rates due to the importance of the Retail Sales report and the potential reaction to this weekend’s geopolitical events. The calmest day may be Friday. However, there are plenty of variables this week outside of scheduled economic reports that can alter the direction of the markets without notice. This means that we may have an extremely active week for rates or quite possibly, rates may hold relatively flat. With so much going on, it would be prudent to keep an eye on the markets if still floating an interest rate and closing in the near future.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now…

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