Market Commentary for the Last Week of March

This week brings us the release of six economic reports that have the potential to move mortgage rates with two of them considered to be highly important to the markets. The first is February’s Personal Income & Outlays report early Monday morning. This data helps us measure consumers’ ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending related information has on the financial markets. If a consumers’ income is rising, they are more likely to make additional purchases in the near future. This raises inflation concerns, adds fuel for economic growth and has a negative effect on the bond market and mortgage rates. Current forecasts are calling for a 0.3% increase in income and a 0.2% rise in spending. Smaller than expected increases would be good news for bonds and mortgage shoppers.

Tuesday also has only one report worth watching. This will come from the New York-based Conference Board at 10:00 AM ET when they post their Consumer Confidence Index (CCI) for March. This index gives us an indication of consumers’ willingness to spend. Bond traders watch this data closely because consumer spending makes up over two-thirds of our economy. If this report shows that confidence in their own financial situations is falling, it would indicate that consumers are less apt to make a large purchase in the near future. If it reveals that confidence looks to be growing, we may see bond traders sell as economic growth may rise, pushing mortgage rates higher Tuesday morning. It is expected to show a reading of 96.2 down slightly from February’s 96.4 reading. The lower the reading, the better the news it is for bonds and mortgage rates.

The ADP Employment report is set for release early Wednesday morning, which has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. This report tracks changes in private-sector jobs of ADP’s clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that usually follows a couple days later. Still, because we could see at least a moderate reaction to the results, we will be watching it. Analysts are expecting it to show that 228,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.

Wednesday’s second report is actually one of those highly important ones and comes at 10:00 AM ET. That is when the Institute for Supply Management (ISM) will release their manufacturing index. This index gives us an important measurement of manufacturer sentiment by surveying manufacturing executives. It is the first piece of data that we see each month that covers the preceding month. In other words, it is the freshest economic data each month. A reading above 50 means more surveyed executives felt business improved during the month than those who said it had worsened. This month’s report is expected to show a reading of 52.5, which would be a decline from February’s reading of 52.9. This means that analysts think business sentiment slipped from last month’s level. That would be relatively good news for the bond market and mortgage rates, although a noticeable decline would be better for rates. The higher the reading, the worse news it is for bonds and mortgage rates.

February’s Factory Orders will be released late Thursday morning. This data is similar to last week’s Durable Goods Orders report, except it includes orders for both durable and non-durable goods, giving us another measurement of manufacturing sector strength. It is considered to be only moderately important to the bond and mortgage markets, so unless it varies greatly from forecasts of a 0.5% decline, I suspect that the data will have a minimal impact on Thursday’s mortgage rates.

The biggest news of the week will come early Friday morning when the Labor Department posts March’s Employment report, revealing the U.S. unemployment rate and the number of jobs added or lost during the month. This is an extremely important report to the financial and mortgage markets. It is expected to show that the unemployment rate remained at 5.5% and that approximately 248,000 payrolls were added to the economy during the month. A higher unemployment rate and a much smaller than expected payroll number would be good news for bonds and could likely push mortgage rates lower Friday morning because it would indicate weaker than thought conditions in the employment sector of the economy.

Overall, Friday is the biggest day of the week due to the significance of the Employment report but I suspect we will have an active day in mortgage rates Wednesday also. Adding to the importance of Friday’s data is the fact that the bond market will be open only until noon in recognition of the Good Friday holiday while the stock markets will be closed the entire day. It surely will be an interesting day to cap off the week. I strongly recommend maintaining contact with your mortgage professional this week if still floating an interest rate and closing in the near future.