Daily Market Update

Updated on November 20, 2018 10:24:22 AM ESTSubscribe To Receive Daily Market Updates
Tuesday’s bond market has opened in positive territory with stocks in selling mode. The major indexes are showing significant losses, pushing the Dow lower by 590 points while the Nasdaq has lost 188 points. The bond market is currently up 7/32 (3.03%), which should keep this morning’s mortgage rates close to yesterday’s early levels. The heavy selling in stocks hasn’t impacted mortgage bonds as much as we would expect, at least not yet. That leaves us in a situation where we could see an intraday improvement to rates if stocks do not rebound soon.

October's Housing Starts was posted early this morning, revealing a 1.5% increase in new home groundbreakings last month. This was in line with expectations and is not a reason for this morning’s stock selling nor the somewhat muted reaction mortgage bonds are having to it. The data has been a non-factor in this morning’s rates.

Tomorrow morning has four economic reports that we need to be concerned with, one of which is considered to be pretty important. The first and most important of the batch is October's Durable Goods Orders at 8:30 AM ET. This data helps us measure manufacturing strength by tracking orders for big-ticket items or products that are expected to last three or more years, such as airplanes, appliances and electronics. It is known to be quite volatile from month-to-month, so sizable swings from the previous month are fairly normal. It is expected to show a 2.6% decline in new orders. A larger than expected drop would be considered good news for the bond market and mortgage rates as it would indicate the manufacturing sector was not as strong as thought. We need to see a sizable variance from forecasts though for the markets to have a noticeable reaction due to the usual volatility in the data. It is worth mentioning though that this is the most important report of the week and one of the more important we get each month.

Next up will be October's Existing Home Sales data at 10:00 AM ET. The National Association of Realtors will give us a measurement of housing sector strength and mortgage credit demand by tracking home resales in the U.S. This report is expected to show a rise in sales, meaning the housing sector strengthened slightly last month. That would be relatively bad news for the bond market and mortgage pricing, but unless it shows a significant surprise, it will likely not have a major impact.

The third report of the day will be the revised University of Michigan Index of Consumer Sentiment for November. Current forecasts are calling for little change from the 98.3 preliminary reading two weeks ago, meaning surveyed consumers felt nearly the same about their own financial and employment situations as they did earlier in the month. Bond traders would prefer to see a decline because waning confidence usually means consumers are less likely to make a large purchase in the near future, restricting economic growth. But as long as we don’t see a large upward move, the report will likely have a minimal impact on rates.

The last report of the week will come from the Conference Board, also at 10:00 AM ET. They will release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.1% increase, meaning economic activity will likely rise modestly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to miss forecasts by a wide margin for it to affect mortgage rates.

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