Sample Commentary Report




 Thursday’s bond market initially was in positive territory before slipping into negative ground but has since rebounded back into the positive. Stocks are reacting negatively to the same data along with earnings news from Apple, driving the Dow lower by 409 points and the Nasdaq down 135 points. The bond market is currently up 8/32 (2.60%), which should improve this morning’s mortgage rates by approximately .250 of a discount point if comparing to Wednesday’s early pricing.

The first of this morning’s two monthly economic reports was December’s ADP Employment report at 8:15 AM ET. It showed that 271,000 private-sector payrolls were added to the economy last month, exceeding forecasts by a wide margin. Analysts were expecting to see 170,000 new jobs, indicating the employment sector was much stronger than expected last month. It is worth noting that this report often does not reflect similar results as the more credible monthly governmental Employment report that will be posted tomorrow. In other words, we will wait until tomorrow’s release to get too concerned about employment sector growth. Still, this morning’s release did have a negative impact on bond trading, erasing pre-market gains.

Fortunately, the second release of the morning gave us very favorable results. The Institute for Supply Management (ISM) announced at 10:00 AM ET that their manufacturing index for December stood at 54.1. This was well below forecasts of 57.8 and a sizable decline from November’s 59.3. The lower reading means fewer surveyed business executives felt business improved during the month than in November. That is a sign of a weakening manufacturing sector, making the data great news for bonds and mortgage rates. It has helped push bonds back to their early morning levels before the ADP report was released.

Tomorrow has a couple of events scheduled that are likely to influence mortgage rates. The biggest news of the week will come at 8:30 AM when the Labor Department will post December’s employment figures. Because the Labor Department is fully funded through next September, this release is not affected by the partial government shutdown. The Employment report is arguably the single most important monthly release we see. It gives us the national unemployment rate, the number of jobs added or lost during the month and average hourly earnings, which is a key measure of wage inflation. Rising unemployment, a decline in payrolls and flat earnings would be ideal news for the bond market. Current forecasts call for no change in the unemployment rate of 3.7% while 180,000 new jobs were added to the economy and an increase in earnings of 0.3%. If we see weaker than expected results, the bond market should rally and stocks should fall, improving mortgage rates again tomorrow. However, stronger than expected readings will likely raise optimism about the economy, pushing stocks and mortgage rates higher.

Also tomorrow is a speaking engagement by Fed Chairman Powell that will be watched closely. He is expected to speak in Atlanta at 10:15 AM ET. The speaking panel also includes previous Fed Chairs Janet Yellen and Ben Bernanke. With three Fed Chairs speaking at the same event, there is a strong possibility of their words affecting the markets and mortgage rates.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float 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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