Tuesday’s bond market has opened well in positive territory following favorable economic news. Stocks are showing early gains despite that data, pushing the Dow up 268 points and the Nasdaq up 8 points. The bond market is currently up 17/32 (4.14%), which should improve this morning’s mortgage rates by approximately .125 - .250 of a discount point.

This week’s first relevant economic release was December's Retail Sales report at 8:30 AM ET this morning. It revealed consumers spent much less than expected, raising concerns about economic growth since their spending makes up over two-thirds of the U.S. economy. The report was expected to show a 0.5% increase in retail-level sales, but was unchanged from November. Furthermore, a secondary reading that excludes more volatile and costly auto transactions also was flat compared to November when it was predicted to rise 0.4%. These numbers may be a result of attempts from businesses to pass tariff costs onto consumers that aren’t working.

It is also worth noting that January’s consumer confidence readings dropped significantly. This is relevant because confidence readings usually are a precursor to consumer spending trends. The fact December’s spending numbers were surprisingly soft and January’s confidence readings were much lower than expected means January’s Retail Sales report could also be weak. Besides being good news for mortgage rates because it is a sign of slower economic activity, this report could also contribute to the Fed making another cut to key short-term interest rates sooner than later- especially if the employment sector shows signs of weakness also.

Today’s second report was the 4th Quarter Employment Cost Index (ECI) that showed a 0.7% increase. The rise means businesses had to pay more for employee wages and benefits during the last three months of the year than the previous quarter. Rising wage costs contribute to inflation because businesses often need to pass those costs on to their clients for their products and services. Fortunately, analysts were expecting to see a 0.8% rise, allowing us to label this report neutral for mortgage rates.

The temporarily delayed governmental Employment report for January will be posted at 8:30 AM ET tomorrow. This is arguably the single most important monthly economic report, with Friday’s Consumer Price Index (CPI) not far behind. Tomorrow’s release will give us many readings on the status of the employment sector, such as the unemployment rate, number of new jobs added or lost during the month and the change in average hourly earnings. The current consensus is for the unemployment rate to have held at December's 4.4% and approximately 65,000 new jobs added to the economy while monthly earnings rose 0.3%. Stronger than expected numbers will likely fuel bond selling and a sizable upward move in mortgage rates, partly because strength in the labor market will allow the Fed to delay making another reduction to key short-term rates. However, data that indicates employment was softer than thought (higher unemployment and fewer than predicted payrolls) should fuel a bond rally and lower mortgage rates tomorrow.

We also have a 10-year Treasury Note auction to deal with tomorrow afternoon. These sales will give us an indication of investor demand for long-term debt. This is relevant because mortgage rates are based on long-term mortgage bonds. If the sale attracts a strong demand from investors, we should see the bond market improve and mortgage rates revise lower after results are announced at 1:00 PM ET tomorrow. On the other hand, a lackluster interest from buyers, particularly international investors, will likely lead to broader bond selling and higher mortgage rates during afternoon trading.

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... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.