What is up with our markets this week

This Week’s Market Commentary

 

This holiday-shortened week brings us the release of four relevant economic reports for the markets to digest. All of the week’s data is being posted over three days due to the Thanksgiving holiday, so the first part of the week should be the most interesting for mortgage shoppers.

October’s Existing Home Sales data will be posted by the National Association of Realtors late Monday morning. It gives us a measurement of housing sector strength and mortgage credit demand by tracking home resales. This report is expected to show a small decline in sales, meaning the housing sector weakened slightly last month. That would be good news for the bond market and mortgage pricing, but unless it shows a significant surprise, it will likely not have a major impact on Monday’s mortgage rates.

Tuesday’s only relevant data is October’s Housing Starts. This report gives us an indication of housing sector strength, but usually does not have a noticeable impact on mortgage rates. I don’t expect this month’s version to be any different unless it varies greatly from analysts’ forecasts. It is expected to show a sizable decline in starts of new homes, meaning the new home portion of the housing sector softened last month.

Also Tuesday is a public speaking engagement by Fed Chairman Bernanke. He will be speaking at a function in New York at 12:15 PM ET, which will be followed by Q&A. This speech isn’t of much importance to the markets. However, anytime he speaks his words have the potential to influence the financial and mortgage markets. Therefore, we will be watching it, but with little concern.

The revised November reading to the University of Michigan’s Index of Consumer Sentiment will be posted late Wednesday morning. It will give us a measurement of consumer willingness to spend. If confidence is rising, consumers are more apt to make a large purchase in the near future, fueling economic activity. Analysts are expecting to see a small downward revision to the preliminary reading of 84.9. Unless we see a significant variance from the forecasted 84.5, I don’t think this data will cause much movement in mortgage rates Wednesday.

The final report of the week will come from the Conference Board at 10:00 AM ET Wednesday when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.2% increase, meaning economic activity will likely rise modestly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to vary by a wide margin from forecasts for it to affect mortgage rates.

The financial markets will be closed Thursday in observance of the Thanksgiving Day holiday. There will not be an early close Wednesday ahead of the holiday, but they will close early Friday and will reopen next Monday morning. I suspect that Friday will be a very light day in bond trading as many market participants will be home. Banks have to be open Friday, but we will likely see little change to mortgage rates that day.

Overall, I believe that we will see more volatility in the markets and mortgage rates the first couple days of the week. The most important day will probably be Wednesday, while the least important will be Friday. Also worth noting are rising tensions and activities overseas that could affect the global markets and carry into ours. As we have seen recently, those crisis and the markets can get pretty active at any time, so please be careful and maintain contact with your mortgage professional if you have not locked an interest rate yet.