Wednesday, October 14th
Wednesday’s bond market has opened well in negative territory following stronger than expected inflation data. Stocks are also reacting negatively to the news, pushing the Dow lower by 20 points and the Nasdaq down 249 points. The bond market is currently down 14/32 (5.27%), which should cause an increase in this morning’s mortgage rates of approximately .250 of a discount point.
14/32
Bonds
30 yr - 5.27%
20
Dow
51,659
249
NASDAQ
26,955
Trailing 90 Days - National Average
High
Negative
September's Consumer Price Index (CPI) was this morning’s major news. It showed consumer level core inflation was a bit stronger than expected last month and over the previous year. The overall CPI matched forecasts with a 0.6% monthly jump, while the year-over-year rose from August’s 3.4% pace to 3.7% last month. However, the worst news came in the more important core readings that strip out volatile food and energy costs. Both core readings exceeded predictions (up 0.3% vs 0.2% in September and a 2.5% vs 2.6% rate annually). It is the core numbers that are raising the loudest alarms this morning, raising the possibility that the Fed may need to act at this month’s FOMC meeting rather than waiting for December’s meeting.
Medium
Unknown
This afternoon’s release is the Federal Reserve's Beige Book report at 2:00 PM ET. It summarizes economic activity through the eyes of business contacts within each Fed region, giving the Fed insight while making monetary policy decisions at their FOMC meetings. We aren’t expecting the report to cause a major sell-off in the stock or bond markets, but it is still worth watching as it could draw enough of a reaction to change rates slightly.
High
Unknown
Tomorrow morning has three pieces of economic data set for release at 8:30 AM ET, two of which are also considered to be highly influential. One is September’s Retail Sales report that gives us consumer spending data. This type of data is so important to the markets because consumer spending makes up over two-thirds of the U.S. economy. If spending is strong, overall economic growth is likely to be stronger, making stocks more appealing and bonds less attractive to investors. If we see weaker than expected readings in this report, the bond market should respond favorably, pushing mortgage rates lower. Current forecasts show a 0.3% increase in sales. Good news for the bond market and mortgage pricing would be a decline.
High
Unknown
September’s Producer Price Index (PPI) will be tomorrow’s second release. The PPI is the sister report to today’s CPI, but tracks inflationary pressures at the wholesale level of the economy instead of the consumer level. Analysts are expecting the overall PPI to be up 0.5% while the core reading rose 0.3%. As we saw with this morning’s reaction, bond traders want to see weaker inflation readings. If tomorrow’s numbers are softer than expected, we may see an improvement in mortgage rates. On the other hand, stronger than predicted wholesale inflation could flow into the consumer level, raising CPI future CPI numbers even further.
Medium
Unknown
The final piece of data in tomorrow’s batch of reports will be last week’s unemployment figures. They are expected to show 200,000 new claims for jobless benefits were made last week. This would be a small increase from the previous week’s 197,000 initial filings to indicate slight weakness in the employment sector. Good news for rates would be a much larger number of new claims, but the morning’s other two reports carry significantly more importance in the markets than this weekly update does. A big move in rates will most likely come from one of those releases and not this one.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.