Updated on March 23, 2017 10:49:45 AM EDT
Februarys New Home Sales was the first of this morning’s two pieces of economic data. The Commerce Department announced at 8:30 AM ET that sales of newly constructed homes rose 6.1% last month, exceeding expectations. This points towards stronger growth in the new home portion of the housing sector, making the data negative for bonds and mortgage rates.
Also posted early this morning was last week’s unemployment figures that showed 258,000 new claims for unemployment benefits were filed last week. This was higher than the 240,000 that was expected and an increase from the previous week’s revised 243,000 initial claims. Because rising claims is a sign of a weakening employment sector, we can consider this news positive for mortgage rates.
We are also watching political current events that are likely to cause at least a short-term move in the markets. The House of Representatives is expected to vote on their proposed Health Care plan. What we can expect is a knee-jerk reaction once the vote is finalized. If it passes the House, I believe we will see negative reaction in bonds and quite possibly, upward revisions to rates. On the other hand, failure to vote or even no vote would signal President Trump’s pro-business and pro-economic growth agenda may not come into fruition after all. Since stocks have rallied and bonds have fallen (higher yields and mortgage rates) since the election based on that agenda, we should see stocks backtrack and bonds rally.
Tomorrow’s only relevant economic data will be Februarys Durable Goods Orders at 8:30 AM ET. This Commerce Department report gives us a measurement of manufacturing sector strength by tracking new orders for big-ticket items, or products that are expected to last three or more years such as electronics, appliances and airplanes. This data is known to be volatile from month to month but is still considered to be of fairly high importance to the markets. Analysts are expecting it to show an increase in new orders of approximately 1.3%. A larger increase in orders would be considered negative for bonds as it would indicate strength in the manufacturing sector and could lead to higher mortgage rates Friday morning. Since these orders are volatile, it will take a wider variance from forecasts for it to move mortgage rates than other data requires.
©Mortgage Commentary 2017