Market Commentary for December 29th The Last Week of 2014

Week two of the year-end holiday season has only two monthly economic reports scheduled for release that are relevant to mortgage rates. One of those two is considered to be highly important to the bond and mortgage markets. There is nothing of importance Monday, but we still may see some movement in the markets and mortgage pricing as traders return from the extended holiday weekend.

The Conference Board will post their Consumer Confidence Index (CCI) for December late Tuesday morning. This is a fairly important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial and employment situations, they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely by market participants and can affect mortgage rate direction. Current forecasts are calling for a large increase in confidence from November’s reading of 88.7. Analysts are expecting Tuesday’s release to show a reading of 93.5, meaning consumers felt much better about their own financial situation than they did in November. The lower the reading, the better the news it is for bonds and mortgage pricing.

The bond market will close at 2:00 PM ET Wednesday ahead of the New Year’s Day holiday, but the stock markets are scheduled to be open for a full day of trading. All banks and major U.S. financial markets will be closed Thursday for the holiday and will reopen Friday morning for regular hours. As a result of the holiday schedule, we should see another round of lighter than normal trading a couple days. However, I don’t believe it will be as thin as we saw last week. That should help prevent larger moves in bonds on days with little or no news to justify the move like we saw last week.

After the holiday, the Institute for Supply Management (ISM) will post their manufacturing index for December late Friday morning. This highly important index measures manufacturer sentiment. A reading above 50 means that more surveyed manufacturing executives felt that business improved during the month than those who felt it had worsened. That indicates manufacturing sector strength rather than contraction. Analysts are currently expecting to see a 57.7 reading in this month’s release, meaning that sentiment softened from November’s 58.7. A smaller reading will be good news for the bond market and mortgage shoppers, while a higher than expected reading could lead to higher mortgage rates Friday morning as it would point towards a stronger manufacturing sector.

Overall, I am expecting to see Friday be the most active day for mortgage rates, although Wednesday morning could also be fairly busy as the year comes to an end. It is difficult to label any day as the calmest because even Monday that doesn’t have anything scheduled to be posted could also be relatively busy following last week’s light holiday trading. Therefore, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.