Rate Lock Advisory

Sunday, July 15th

This week has five economic reports scheduled for release in addition to a couple days of Fed testimony in front of congress. Also worth noting is that corporate earnings season has begun. Announcements will be many this week, including Alcoa, which traditionally signals the start of the season.

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Bonds


Market Closed

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Dow


Market Closed

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NASDAQ


Market Closed

Mortgage Rate Trend

Trailing 90 Days - National Average

  • 30 Year Fixed
  • 15 Year Fixed
  • 5/1 ARM

Indexes Affecting Rate Lock

High


Unknown


Retail Sales

June's Retail Sales report will start the week at 8:30 AM ET tomorrow. This data is considered to be of high importance because it measures consumer spending. Consumer spending makes up over two-thirds of the U.S. economy, so any related data is watched closely. The Commerce Department is expected to say that sales at retail level establishments rose 0.5% last month. A larger than expected increase in sales will likely cause bond selling and lead to higher mortgage rates since it would mean consumers are spending more than thought. That would point towards economic growth that makes bonds less attractive to investors.

Medium


Unknown


Industrial Production and Capacity Utilization

June's Industrial Production data will be posted at 9:15 AM ET Tuesday. This data measures output at U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength. It is expected to show a 0.5% rise in production, indicating that the manufacturing sector strengthened during the month. That would basically be bad news for bonds and mortgage rates. However, this report is considered to be only moderately important, so any reaction will be minimal.

High


Unknown


Fed Talk

Tuesday also brings us day one of the Fed’s semi-annual congressional update on the economy and monetary policy. Fed Chairman Powell will speak to the Senate Banking Committee Tuesday at 10:00 AM ET and the House Financial Services Committee Wednesday. His testimony will be broadcast and watched very closely. Analysts and traders will be looking for the Fed's opinion on the status of the economy and their expectations of future growth, inflation, unemployment and need for rate hikes. These topics should create a great deal of volatility in the markets during the prepared testimony, which is often released prior to appearing, and the Q&A session that follows. If he indicates that inflation is a concern or anything that hints at rapid economic growth and more rate hikes than currently expected, we can expect to see the bond market fall and mortgage rates rise Tuesday.

Medium


Unknown


Misc Fed

We usually see the most movement in the markets and mortgage rates during the first day of this testimony. This is because the speaker's prepared words for both appearances are quite similar to each other, meaning that the second day of testimony rarely gives us anything we did not hear during the first day. The general exception is something asked or answered during the Q&A portion of the second day's appearance.

Low


Unknown


Housing Starts (New Residential Construction)

Besides day two of Fed Chairman Powell’s testimony, we also have June's Housing Starts being released Wednesday morning. It will give us an indication of housing sector strength and future mortgage credit demand, but usually doesn't cause much movement in mortgage rates unless it varies greatly from forecasts. Wednesday's release is expected to show a decline in construction starts of new homes last month. The lower the number of starts, the better the news it is for the bond market, as it would indicate a weaker than expected new home portion of the housing sector.

Medium


Unknown


Fed Beige Book

Also Wednesday, the Federal Reserve will release its Beige Book report at 2:00 PM ET. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by Fed region throughout the U.S. If there are any significant changes in conditions since the last update, we could see afternoon moves in the markets and mortgage rates. Signs of weakness should translate into bond strength and better mortgage rates.

Low


Unknown


Leading Economic Indicators (LEI) from the Conference Board

The final economic report of the week will be June's Leading Economic Indicators (LEI) late Thursday morning. This Conference Board index attempts to measure economic activity over the next three to six months. While it is not a factual report, it still is considered to be of moderate importance to the bond market. It is expected to show a 0.4% increase, meaning it is predicting gains in economic growth over the next few months. A decline in the index would be good news for the bond and mortgage markets.

Medium


Unknown


Corporate Earnings

In regards to stocks and corporate earnings this week, Alcoa is expected to post theirs after the market closes Wednesday. Therefore, it will have an impact on overnight and early morning trading Thursday. This company isn't necessarily key to gauging economic strength, but it is the first Dow component company that posts earnings each quarter. Since it is the first look into Dow-related earnings, it draws plenty of attention in the markets. However, there are plenty of other earnings releases that will also be in the spotlight. Generally speaking, weaker corporate earnings translates into stock selling that makes bonds more attractive to investors. As bond buying pushes prices higher, yields fall and mortgage rates usually track bond yields.

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Unknown


None

Overall, Tuesday has the potential to be the most active day of the week, depending on what type of reaction the markets have to the Fed's congressional testimony. If there are any surprises in his testimony or answers, the reaction in the markets will probably be strong. Tomorrow is also a good candidate with Retail Sales figures being posted. The calmest day will likely be Friday, although corporate earnings can heavily drive trading any day. Better than expected earnings would be good for stocks and have a negative impact on bonds. Disappointing earnings should fuel bond buying and lower mortgage rates. With so much going on this week, it is highly recommended that you maintain contact with your mortgage professional if closing soon and still floating an interest rate.

Float / Lock Recommendation

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.