| Market Comment
Mortgage bond prices finished the week lower which put upward pressure on rates. Orders for durable goods, items lasting more than three years, fell 1.1%. That data was weaker than the 0.6% decline traders expected. Consumer confidence printed at 118.9, which was better than expected. Consumers may be feeling good because the value of their homes continues to rise. According to the S&P Case-Shiller report home prices rose 5.7% on an annualized basis. Rates were pressured all week as the heads of central banks in Europe, England and Canada all indicated that it may be time to begin reducing accommodations (read hike rates). The announcements from the ECB, BOE and BOC seemed coordinated. We ended the week worse by approximately 1/4 of a discount point.
LOOKING AHEAD
Economic
Indicator |
Release
Date & Time |
Consensus
Estimate |
Analysis |
| ISM Index |
Monday, July 3,
10:00 am, et |
55 |
Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Factory Orders |
Wednesday, July 5,
10:00 am, et |
Down 0.1% |
Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Fed Minutes |
Wednesday, July 5,
2:00 pm, et |
None |
Important. Details of the last Fed meeting will be thoroughly analyzed. |
| ADP Employment |
Thursday, July 6,
8:30 am, et |
255K |
Important. An indication of employment. Weakness may bring lower rates. |
| Weekly Jobless Claims |
Thursday, July 6,
8:30 am, et |
238K |
Important. An indication of employment. Higher claims may result in lower rates. |
| Trade Data |
Thursday, July 6,
8:30 am, et |
$47B deficit |
Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| Employment |
Friday, July 7,
8:30 am, et |
4.3%,
Payrolls +138K |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
Factory Orders
Factory orders data is a monthly report released by the US Census Bureau. The release is officially referred to as The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories, and Orders.
The manufacturing sector is a major component of the economy. Investors use the factory orders report to attempt to determine the direction of the economy in the future. Orders are generally believed to be a precursor to activity in the manufacturing sector because manufacturing typically has an order before considering an increase in production. Conversely, a decrease in orders eventually causes production to scale back; otherwise, the manufacturer accumulates inventories, which must be financed.
Total factory orders break down to approximately 55% durable and 45% non-durable. Durable goods are items such as refrigerators, cars, and aircraft. Non-durables are items such as cigarettes, candy, and soap. The report is often dismissed due to the timing of the release. Durable goods orders are typically reported a week earlier making a portion of the factory orders data “old news.” While some analysts dismiss the value of the factory orders data others point out the fact that the report provides a more complete picture than the initial durable goods release. Revisions to initial data along with non-durable figures are factored in providing a more accurate look at the condition of the manufacturing sector.
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