Housing and Jobs Numbers Signal Firmer Economy
U.S. home resales jumped more than expected in December and claims for new jobless claims last week posted their biggest decline in nearly a year, showing two key economic trouble spots on the mend. Other reports also offered reason for optimism, with mid-Atlantic factory activity holding up well and an index of leading indicators surpassing economists’ forecasts.
The raft of positive data on Thursday renewed hope that 2011 growth will surpass last year’s performance, which was not robust enough to put a meaningful dent in the nation’s elevated 9.4 percent unemployment rate. “Most of the reports today were fairly good. For anyone skeptical about the U.S. recovery, these should ease concern,” said Kathy Lien, director of research at GTF Forex in New York.
Most of the major indices fell during the holiday-shortened week, with the S&P 500 declining 0.8% as earnings came in mixed and concerns increased that China will raise interest rates.
Monday is the only day of the week with nothing of importance scheduled. The first of this week’s events is the release of January’s Consumer Confidence Index (CCI) late Tuesday morning. This report is considered to be of moderate to high importance to the bond market and therefore can move mortgage rates. It is an indicator of consumer sentiment, which is important because waning confidence in their own financial situations usually means that consumers are less willing to make large purchases in the near future.
Wednesday is this year’s first FOMC meeting results. It is expected to yield no change to short-term interest rates, but as is often the case, traders will be looking for any indication of the Fed’s next move
and when they may make it.
Thursday morning brings us the release of December’s Durable Goods Orders. This data helps us measure manufacturing strength by tracking new orders at U.S. factories for products that are expected to last three or more years, also known as big-ticket items. The data often is quite volatile from month to month, but is currently expected to show an increase in orders of approximately 1.5%. A smaller than expected increase would be considered good news for bonds and mortgage rates, but a slight variance likely will have little impact on Thursday’s mortgage pricing.
Next up is Friday, which has three reports scheduled for release. The first of them is arguably the single most important reports that we see regularly. The initial reading of the 4th Quarter Gross Domestic Product (GDP) will be posted early Friday morning. This data is so important because it is considered to be the best measurement of economic growth. Its’ results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. There are three readings to each quarter’s activity, each released approximately one month apart. The first reading, which usually carries the most significance, is expected to be an increase of 3.8%. A noticeably weaker reading would be great news for the bond market, questioning the pace of the economic recovery. That would likely fuel stock selling and a rally in bonds that would push mortgage rates lower Friday morning. However, a stronger than expected reading would probably lead to bond selling and higher mortgage rates.
Overall, look for Wednesday or Friday to be the biggest days for mortgage rates. Friday’s GDP is the single most important piece of data this week, but we may see quite a bit of movement in rates Wednesday afternoon. If we see weaker than expected results from the most important reports, mortgage rates should close the week lower than last Friday’s closing levels. If the data shows stronger than expected results, we may see mortgage rates move higher for the week. This is of course, assuming that the Fed meeting doesn’t reveal any surprises.
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