Monday, February 28, 2011

Market UpDate W/Small Improvement in Mortgage Rates

Monday’s bond market has opened fairly flat despite early stock gains and mixed economic data. The stock markets are starting the week in positive ground with the Dow up 73 points and the Nasdaq up 14 points. The bond market is currently up 2/32, but we should see a small improvement in this morning’s mortgage pricing due to strength late Friday.

January's Personal Income ad Outlays data was posted early this morning, revealing a large jump in personal income but a smaller than expected rise in spending. The data showed that income rose 1.0% last month, greatly exceeding forecasts of a 0.3% increase. However, offsetting this negative news was a 0.2% increase in spending when analysts were looking for a 0.4% rise. This means that consumers earned more money than thought, but did not spend it. That basically makes this data neutral towards mortgage rates.

Tomorrow’s big news is the Institute for Supply Management’s (ISM) manufacturing index for February. This late morning release will help us measure manufacturer sentiment and can have a pretty large impact on the financial and mortgage markets if it varies from forecasts. It is expected to show a decline from January's 60.8 to 60.5 this month. This is important because a reading above 50.0 means more surveyed manufacturers felt business improved during the month than those who felt it had worsened, meaning likely growth in the manufacturing sector. If we see a weaker than expected reading, the bond market could rally as it would mean manufacturer sentiment slipped during the month. But, a higher than forecasted reading could lead to major selling in bonds, causing mortgage rates to rise tomorrow morning.
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