Monday has the Institute for Supply Management (ISM) posting their manufacturing index for September at 10:00 AM ET. This index measures manufacturer sentiment and it can be heavily influential on the markets and mortgage rates. Analysts are expecting to see little change from August's 49.6 reading, meaning surveyed manufacturers felt business conditions were steady from the previous month. The 50.0 benchmark is extremely important because a reading below that level means more surveyed executives felt business worsened in the month than those who said it had improved. This data is important not only because it measures manufacturer sentiment, but it is also very recent data. Some economic releases track data that are 30-60 days old, but the ISM index is only a few weeks old, usually the first report we see each month. If it reveals a reading below 49.6, meaning sentiment fell short of expectations, we should see the bond market move higher and mortgage rates fall tomorrow.
Tuesday and Wednesday have nothing of concern scheduled for release. Look for the stock markets to drive bond trading and mortgage rates. Stock strength will likely pressure bonds and lead to an increase in mortgage rates, while stock selling should draw funds into bonds and help lower mortgage pricing.
Thursday's monthly economic data will come from the Commerce Department, who will post August's Factory Orders data at 10:00 AM ET. This manufacturing sector report is similar to last week's Durable Goods Orders release, but also includes orders for non-durable goods. It can impact the bond market enough to change mortgage rates if it varies from forecasts by a wide margin. Analysts are forecasting a decline of 6.0% in new orders, meaning manufacturing activity slowed considerably in August. This would be good news for the bond market and mortgage pricing, but I believe we will need to see a much larger decline for this report to create a noticeable improvement in rates.
Later Thursday is the release of the minutes from the last FOMC meeting. These may be a major mover of the markets or could be a non-factor, depending on what they say. The key will be concerns over the economy, inflation and the Fed's next move. If Fed members were concerned about the economy slipping into another recession, we may see the bond market move higher and mortgage rates lower Thursday afternoon. It will be interesting to see how much debate and disagreement amongst members took place during the meeting. However, since we already know about the QE3 program that was announced last month, I don’t believe we will see mortgage rates show much reaction to these minutes. They will be posted at 2:00 PM ET, so any reaction will come during afternoon trading.
Also worth noting is some news from overseas before the markets open Thursday. The Bank of England’s monetary policy announcement (equivalent to our FOMC) will be released at 7:15 AM ET while the European Central Bank will announce at 7:45 AM ET. The ECB will draw the most attention as global investors are extremely concerned about the Eurozone and what actions will be taken to shore up some of its’ member’s finances. We don’t normally address these events but recent announcements have drawn a lot of attention here, so we should be on the alert for a reaction in the bond and mortgage markets.
The Labor Department will post September's Employment report early Friday morning. This report will reveal the U.S. unemployment rate, number of new payrolls added or lost during the month and average hourly earnings. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings.
If this report gives us weaker than expected readings, bond prices should move higher and we should see lower mortgage rates Friday. However, stronger than forecasted readings could cause a sizable spike in mortgage pricing and start an upward trend in rates. Analysts are expecting to see the unemployment rate remain at 8.1%, an increase of 120,000 new jobs from August's level and a 0.2% increase in earnings.
Overall, I suspect we will see a fair amount of volatility in the markets and mortgage rates this week, but the busiest days will probably be early and late in the week. There isn't that much data being released, but what is being posted is extremely important to the markets and highly influential on mortgage pricing. Labeling tomorrow and Friday as the most important days is easy due to the importance of the economic reports scheduled those days. The calmest days for mortgage rates will likely be Tuesday or Wednesday but major moves in the stock markets either day could lead to movement in mortgage rates. Even though there are only a couple of relevant economic reports being posted this week, it would still be prudent to maintain fairly constant contact with your mortgage professional this week if still floating an interest rate.
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