Market Comment
Mortgage bond prices finished the week lower which pushed rates higher. Rates started the week higher and ended the week higher with only a slight reprieve Thursday. The NAHB Housing Index was higher than expected. Housing starts were 1211K versus the expected 1180K. Consumer prices were relatively in check. The core rose 0.1% versus the expected 0.2% increase. Industrial production rose 0.7% versus the expected 0.3% increase. Fed members appeared to prep the financial markets for a rate hike this year. New York Fed President Dudley and San Francisco President Williams both talked about a rate hike and Williams said the Fed should hike sooner rather than later. The Fed minutes from the last meeting even showed that a member voted for a rate increase. Mortgage interest rates finished the worse by approximately 1/4 to 3/8 of a discount point.
Durable Goods Durable goods orders are generally believed to be a precursor of activity in the manufacturing sector because manufacturing must have an order before considering an increase in production. Conversely, a decrease in orders eventually causes production to be scaled back; otherwise the manufacturer accumulates inventories, which must be financed. Unfortunately, durable goods orders data has many drawbacks. The first problem with the orders data is that they are extremely volatile. The volatility of the data usually is attributed to the civilian aircraft and defense components of the figure. For example, if Boeing has a big order for one of its jumbo jets, the civilian aircraft category can change by $3-4 billion. The same scenario is evident when an aircraft carrier is ordered, surges in the defense category result. The second problem with the data is that orders are continuously being revised. There are many times in the past when the advance report on durables showed an increase while a revision a week later showed a decrease. The revised data is found in the report on manufacturing orders, shipments, and inventories. Since the data is very volatile and difficult to forecast, there is quite often a huge disparity between the actual release and the initial projections. Be cautious heading into the data.
|
||||||||||||||||||||||||||||||||
-
Recent Posts
-
Recent Comments
-
Archives
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- December 2015
- November 2015
- October 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- June 2013
- April 2013
- February 2013
-
Categories
-
Meta