Daily Market Update

Updated on September 18, 2019 3:15:02 PM EDT
WEDNESDAY AFTERNOON UPDATE:
This week’s FOMC meeting has adjourned with an announcement of another .25 of a percent cut to key short-term interest rates. This move was pretty much expected. The Fed also indicated that at least one more rate cut is likely by the end of the year. They meet in late October and mid-December to decide.

While this was generally good news for the bond market and mortgage rates, it also wasn’t much of a surprise. The cause of the negative reaction could be their economic projections that show a little stronger economy than previously thought. They now believe the economy will grow at an annual rate of 2.2% this year compared to the 2.1% from the last update.

Overall, there is not too much to be surprised by from this meeting. The Fed signaled concern about the ability of the economy to continue to grow with the current trade wars, Brexit and other geopolitical and financial hurdles the global economy is facing. By theory that is a favorable scenario for bonds and mortgage rates. Stocks have had a minor reaction to the events with the Dow and Nasdaq both still near morning levels. The bond market has reacted negatively by giving up some of this morning’s gains. It currently is up 5/32 (1.79%), which is enough of move to cause some lenders to revise rates slightly higher before the end of the day.

August's Housing Starts report was posted early this morning, revealing a 12.3% jump in new home groundbreakings last month. That was stronger than expected, hinting at housing sector strength. As with most signs of economic strength, we should consider the data bad news for bonds and mortgage pricing. However, this is not considered to be highly important data, meaning it has had little impact on this morning’s trading.

Tomorrow has two pieces of data that we will be watching. First is August's Existing Home Sales from the National Association of Realtors at 10:00 PM ET. This report will give us another indication of housing sector strength by tracking home resales in the U.S. It is expected to show a decline from July's sales. Good news would be a sizable decline in sales because a weakening housing sector makes broader economic growth more difficult.

The final report of the week will come from the Conference Board who will post their Leading Economic Indicators (LEI) for August late Thursday morning also. The moderately important LEI index attempts to measure economic activity over the next three to six months. It is expected to show a 0.1% increase, meaning that it is predicting modest growth in economic activity over the next several months. A larger increase would be considered negative news for bonds and could lead to a small increase in mortgage rates Thursday.


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