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Mortgage Market in Review – April 14, 2014

Market Comment Mortgage bond prices finished the week higher, which pushed rates lower.  The market was positive most of the week as stocks struggled.  The economic data was generally not rate friendly but things were kept in check with continued stock weakness throughout most of the week.  Weekly jobless claims printed at 300k and continuing claims, a summation of all receiving benefits at 2,776k.  Traders’ expected claims to remain unchanged at 326k and continuing claims to increase 7k to 2,843k.  Producer prices rose 0.5% in March and the core value, which excludes the volatile food and energy costs, rose 0.6%. That data was considerably higher than the expected 0.1% increase for each.  Mortgage interest rates improved by over 1/2 a discount point for the week.

LOOKING AHEAD

Economic Indicator

Release Date & Time

Consensus Estimate

Analysis

Retail Sales

Monday, April 14, 8:30 am, et

Up 0.5%

Important.  A measure of consumer demand.  A smaller than expected increase may lead to lower mortgage rates.

Consumer Price Index

Tuesday, April 15, 8:30 am, et

Up 0.2%, Core up 0.1%

Important.  A measure of inflation at the consumer level.  Weaker figures may lead to lower rates.

Housing Starts

Wednesday, April 16, 9:15 am, et

954k

Important.  A measure of housing sector strength.  Weakness may lead to lower rates.

Industrial Production

Wednesday, April 16, 9:15 am, et

Up 0.4%

Important.  A measure of manufacturing sector strength.  A lower than expected increase may lead to lower rates.

Capacity Utilization

Wednesday, April 16, 8:30 am, et

78.2%

Important.  A figure above 85% is viewed as inflationary.  Weaker figure may lead to lower rates.

Fed “Beige Book”

Wednesday, April 16, 2:00 pm, et

None

Important.  This Fed report details current economic conditions across the US.  Signs of weakness may lead to lower rates.

Weekly Jobless Claims

Thursday, April 17, 8:30 am, et

298k

Important.  An indication of employment.   Higher claims may result in lower rates.

Philadelphia Fed Survey

Thursday, April 17, 10:00 am, et

8.2

Moderately important.  A survey of business conditions in the Northeast.  Weakness may lead to lower rates.

Stocks

The equity markets have been under pressure lately leaving both the Dow Jones index and NASDAQ negative from the beginning of the year.  Share prices of companies with strong earnings and decent outlooks have fallen despite improvements in the economy.

Pundits point to a variety of reasons ranging from the Federal Reserve to the situation in Ukraine.  Companies in the US have enjoyed ultra low borrowing rates for almost half a decade.  The low cost of funds allowed some businesses to borrow money in the bond market, pay dividends and repurchase outstanding shares, further increasing the value of the company.  But all good things must come to an end.

The Federal Reserve will continue to taper asset purchases and at some point will start raising rates as the economy improves.   The number of people seeking unemployment assistance is at levels not seen since 2007, an indication the labor market is healing.  The Fed expects to be out of the bond buying business by the end of the year and may start increasing rates in mid 2015. 

Adding pressure to stocks is the situation in Ukraine.  The sanctions used by the US and our allies will increase sharply as Russian aggression increases.  A move by Russia into eastern Ukraine would likely put further pressure on stocks.

Copyright 2014. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com The information contained herein is believed to be accurate, however no representation or warranties are written or implied.