Daily Market Commentary
Updated on September 19, 2017 10:05:25 AM EDT Tuesday’s bond market has opened in positive territory with the major stock indexes mixed and today’s only economic data having little influence on trading. The Dow is currently up 13 points while the Nasdaq has slipped 2 points. The bond market is currently up 3/32 (2.22%), but this morning’s mortgage rates should remain close to yesterday’s early pricing.
The Commerce Department gave us this morning’s sole economic report with the release of August's Housing Starts. They announced a 0.8% decline in new home groundbreakings, indicating housing sector weakness. While the headline can be considered favorable news, the decline actually comes as a result of a sizable upward revision to July’s starts. The number of starts in August was higher than analysts were expecting to see. Therefore, we can consider this data neutral for mortgage rates.
Tomorrow has one economic report worth watching, August's Existing Home Sales from the National Association of Realtors at 10:00 AM 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 slight increase from July's sales. Good news would be a sizable decline in sales.
The big events of the week will come from the Fed tomorrow afternoon. They start with the FOMC meeting that probably will not yield an increase in key short-term interest rates. It will adjourn at 2:00 PM ET. There is a small chance of the Fed raising rates at this meeting but the consensus is that they will not. What will be of interest is verbiage in the post-meeting statement that may hint when the Fed will make their next move. Analysts and traders will also be looking for changes to the Fed’s massive balance sheet. Rapid selling of holdings is bad for bonds and mortgage rates.
Also at 2:00 PM ET, the Fed will release their revised economic projections for the U.S. The markets are interested in whether Janet Yellen and friends think economic conditions will be stronger or weaker in the coming months and years than previously thought. Key readings the markets will be looking for are the unemployment rate, inflation and overall GDP growth. Downward revisions by the Fed will be good news for bonds and mortgage pricing because it would mean another bump to key short-term interest rates before the end of the year may not be a sure thing after all. On the other hand, upward revisions that indicate the economy is likely to support a Fed rate hike could cause bond selling and an increase to mortgage rates.
The adjournment, post-meeting statement and economic projections will be followed by a press conference with Fed Chair Yellen at 2:30 PM ET. All Fed meetings are highly important, but this one is particularly significant for the financial and mortgage markets due to the uncertainty of when the Fed will make another monetary policy move and unwind their current holdings. Analysts and market traders will be watching her words carefully for any indication on the likelihood of a rate hike later this year (assuming one was not made at this meeting). Any question or answer at the press conference can impact the markets, so there is a decent chance of seeing quite a bit of volatility tomorrow afternoon.
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