Market Commentary for the Week of July 21st

This week brings us only four pieces of economic data that have the potential to influence mortgage rates. We are also still in corporate earnings season, so any surprises in those releases could affect stock and bond trading, leading to changes in mortgage rates. There is mortgage rate-relevant data set to be posted three of the five days this week.

The week’s activities begin early Tuesday morning with the release of June’s Consumer Price Index (CPI), which is a mirror of last week’s PPI with the exception that this report measures inflation at the more important consumer level of the economy. Analysts have forecasted a 0.3% increase in the overall index and a 0.2% rise in the core data. The core data is considered to be the key reading because it gives us a more stable measure of inflation as it excludes more volatile food and energy prices. Higher than expected readings could raise future inflation fears and push mortgage rates higher, while readings that fall short of forecasts should lead to lower rates early Tuesday.

The National Association of Realtors will post June’s Existing Home Sales figures late Tuesday morning. This report gives us a measurement of housing sector strength and mortgage credit demand. Current forecasts are calling for a small increase in sales from May’s totals. A drop in sales would be considered good news for bonds and mortgage rates because a weakening housing sector makes broader economic growth more difficult. However, unless this data varies greatly from forecasts it probably will lead to only a minor change in mortgage rates.

Wednesday has nothing of importance scheduled that will likely influence mortgage rates. Thursday’s sole economic report is June’s New Home Sales report at 10:00 AM ET. This Commerce Department report gives us another measurement of housing sector strength. Analysts are expecting it to show a decline in sales of newly constructed homes, indicating that the new home portion of the housing sector weakened last month. That would be considered favorable news for bonds, but since this data tracks only a small percentage of all home sales it usually has little impact on the bond market and mortgage rates unless it varies greatly from forecasts. The Existing Home Sales report covers most of the home sales in the U.S.

The Commerce Department will post June’s Durable Goods Orders at 8:30 AM ET Friday. Current forecasts are currently calling for an increase in new orders of 0.3% from May to June. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. A much stronger than expected number may lead to higher mortgage rates Friday morning because it would point towards economic strength. If it reveals a large decline in new orders, mortgage rates should move lower. It should be noted though that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move the markets or mortgage rates.

Overall, Tuesday will likely be the most active day for mortgage rates although Friday’s report is the single most important. Wednesday is the best candidate for calmest day with nothing of importance scheduled. Monday is also light but weekend events in the geopolitical arena could make it a fairly active day. With those unpredictable issues and the uncertainty of corporate earnings, we could see noticeable moves in rates multiple days this week with a decent chance of intraday revisions. Therefore, please proceed cautiously if still floating an interest rate and closing the near future.