Princeton Capital Blog

This Week’s Market Commentary

September 19th, 2011

This week brings us the release of only three monthly reports that are relevant to mortgage rates in addition to another FOMC meeting. None of the economic reports are considered to be of high importance. In fact, all of them are thought to be low or moderately important to the financial markets.

This should help limit the possibility of significant changes to mortgage rates most days this week, with exception to the FOMC meeting results.

There is nothing of concern scheduled for release today, so look for the stock markets to be the biggest influence on bond trading and mortgage rates. If the stock markets extend last week’s streak of gains, we may see pressure in the bond market and small upward changes to mortgage pricing tomorrow. However, if the week starts off with a weak opening in stocks, bonds and mortgage borrowers should benefit.

August’s Housing Starts will kick-off the week’s data early Tuesday morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand by tracking construction starts of new homes, but is usually considered to be of low importance to the financial and mortgage markets. It is expected to show a decline in new home starts between July and August. I believe we need to see a significant surprise in this data for it to have a noticeable impact on mortgage rates Tuesday.

August’s Existing Home Sales report will be released late Wednesday morning. The National Association of Realtors posts this data, giving us an indication of housing sector strength by tracking home resales. It is expected to show a small increase from July’s sales, however, this data probably will be neutral towards mortgage pricing unless its results vary greatly from forecasts. Market traders will likely be more focused on the afternoon activities.

The FOMC meeting begins Tuesday and is a two-day meeting. Mr. Bernanke and friends will adjourn at 2:15 PM ET Wednesday. There is no chance of seeing any type of change to key short-term interest rates. However, the post-meeting statement could very well lead to volatility during afternoon trading as investors dissect it in an effort to find when the Fed’s next move may come.

Market participants are anxiously waiting to hear what the Fed has in mind to help stimulate economic activity. Many feel that there isn’t much that they can do at this point to quickly boost economic growth. This was originally scheduled to be a single day meeting, but was extended to a two-day meeting to allow more time for them to discuss their options. Needless to say, it will be an interesting afternoon Wednesday when the post-meeting statement is read.

The Conference Board will post its Leading Economic Indicators (LEI) for August late Thursday morning. The LEI index attempts to measure economic activity over the next three to six months. It is expected to show a 0.1% rise, meaning that it is predicting a slight increase in economic activity over the next several months. A larger than expected increase would be considered negative news for bonds and could lead to a minor increase in mortgage rates Thursday.

Overall, there really isn’t a specific report that stands out as the most important of the week. The most important day is Wednesday with the housing data and the FOMC meeting, but I don’t believe any of this week’s economic data has the potential to move the markets or mortgage rates heavily. However, we still may see some changes in rates day-to-day, especially if the stock markets move significantly higher or lower. If still floating an interest rate, continued contact with your mortgage professional is recommended, especially the middle part of the week.

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