Updated on November 21, 2018 10:33:57 AM EST
Octobers Durable Goods Orders kicked off this morning’s batch of economic data at 8:30 AM ET. The Commerce Department announced a larger than expected decline in new orders for products such as airplanes, appliances and electronics. Forecasts were calling for a 2.6% decline last month, but today’s release showed a 4.4% drop. This data is known to be quite volatile, so the size of the variance isn’t nearly as significant as it would be in other reports. However, a secondary reading that excludes costly and volatile airplane-related orders came in up 0.1%, short of the 0.4% that was expected. This indicates that the manufacturing sector may not have been as strong last month as many had thought, making the data good news for bonds and mortgage rates.
We had three economic reports posted at 10:00 AM ET. Octobers Existing Home Sales data showed a 1.4% increase from September’s level. This was a little stronger than expected, but the report also showed a 5.1% decline in sales over the past 12 months. That figure underscores the concern about the housing sector for some analysts. While the small increase from last month is technically bad news for mortgage rates, the sizable annual decline is good news. The net result is a minimal influence on this morning’s mortgage pricing.
The third report of the morning was the revised University of Michigan Index of Consumer Sentiment for November. It stood at 97.5, down from the preliminary reading of 98.3 that was posted two weeks ago. This means that surveyed consumers were not as optimistic about their own financial situations as previously thought. That is good news for bonds and mortgage rates because waning confidence usually means consumers are less likely to make a large purchase in the near future. Consumer spending makes up over two-thirds of the U.S. economy. Therefore, weaker levels of spending helps to create an environment that is favorable to long-term securities such as mortgage-related bonds.
The last report of the week was October’s Leading Economic Indicators (LEI) from the Conference Board. Their release revealed a 0.1% increase, matching expectations. The small increase means the indicators are predicting modest economic growth over the next several months. Since it showed no surprises and was this morning’s least important release, it has had no impact on this morning’s mortgage pricing.
The financial markets will be closed tomorrow in observance of the Thanksgiving Day holiday. There is no early closing today, but the stock and bond markets 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. The same can be said to some degree this afternoon also.
Because of the holiday, there will be no update to this report. We would like to take this opportunity to wish you and yours a wonderful Thanksgiving holiday!
©Mortgage Commentary 2018