• Thursday’s mortgage rates should be lower by approximately .125 of a discount point. The bond market is currently up 6/32 (4.43%).
• Stocks are following suit with gains of 164 points in the Dow and 100 points in the Nasdaq.
• Yesterday’s afternoon release of the Fed Beige Book didn’t yield any major surprises but did support inflation concerns from tariffs. The 2:00 PM ET release indicated all twelve of the Fed districts reported tariff-related cost increases during May and early June, particularly raw material for the construction and manufacturing industries.
• Overall economic activity appeared to increase slightly across the country, however, the outlook for the immediate future is still pessimistic.
• The bond market had already improved from Wednesday morning’s levels before the report was posted, meaning even though some lenders issued an intraday improvement to mortgage pricing yesterday afternoon, it was due to the midday bond gains and not because of what the Beige Book showed.
• This morning brought us two 8:30 AM ET economic releases, one of which is considered to be a major report.
• The more influential release was June’s Retail Sales data that revealed a much stronger than expected 0.6% rise in consumer spending last month after a revised decline of 0.9% in May. A secondary reading that excludes more volatile food and energy costs also came in stronger than expected (up 0.5%). Forecasts had the headline sales number up 0.1% and sales without autos up 0.3%.
• The sales numbers are a sign that tariffs haven’t necessarily had a negative impact on consumer spending habits, at least not yet.
• Last week’s unemployment figures were also posted early this morning. They showed 221,000 new claims for jobless benefits were filed, down from the previous week’s revised 228,000 initial filings. Analysts were expecting an increase in claims.
• Tomorrow also has two pieces of data that we will be watching. June's Housing Starts report is set for release at 8:30 AM ET. It will give us an indication of housing sector strength and future mortgage credit demand. The lower the number of starts, the better the news for the bond market even though the data will probably have little impact on mortgage pricing.
• Closing out this week’s economic calendar will be the University of Michigan's Index of Consumer Sentiment at 10:00 AM ET tomorrow. The preliminary reading for July is expected to show an increase from June's final reading of 60.7. This would mean surveyed consumers are more optimistic about their own financial and employment situations this month than they were last month. A decline in confidence would be good news for mortgage rates because it means many consumers are likely to delay making large purchases, limiting economic growth.
• Visit our Daily Commentary page on our site for detailed explanations on current news that is relevant to mortgage rates.