MID-WEEK MARKETS by Jed Marquis

Interest rates are up a slight bit since last Friday on continued stronger than expected manufacturing reports.

What’s Happening?

The 30 year mortgage rate has increased an eighth of a percent since last Friday.  Most of the gain is on low volume and stronger than expected manufacturing data.  Last week we had several stronger than expected manufacturing reports and Tuesday’s ISM Non-Manufacturing Index (yes, a report titled “non-manufacturing” is considered relevant to the manufacturing sector) came in above expectations and we saw a jump in the 10 year treasury but a bigger jump in mortgage rates.  Wednesday we saw buyers step in and start pushing rates back down, again.  The jump was small as we moved from a weak 4.25% to a stronger 4.375% on the 30 year.  The rate increase was more of a rounding factor than a dramatic increase but of course if you’re the home buyer and you get to pay the eighth difference, it matters.

The Mortgage Bankers Association reported that mortgage applications for both purchases and refinances continued to fall with purchase apps being down 5% and refinances down 8%.  Despite a strong decrease in rates from last month and a slight decrease from last week, applications are at their lowest point of the year.  While applications normally taper off during the fall this is far more than expected.

What To Expect

Thursday and Friday hold a number reports that will affect the markets.  Thursday has GDP (an inflation measurement – low inflation is good for rates) and Jobless Claims.  The  market is expecting 335,000 new jobless claims, down 5,000 from last week.  Numbers above that will be good for rates.

Friday has the Employment Situation Report.  The market is expecting about 120,000 non-farm jobs to be created and the unemployment rate to move back up to 7.3% due mostly to the number of available workers in the pool.

Personal Income is expected to be up 0.2% and spending up the same.  The last report for the week is Consumer Sentiment. Consensus is a reading of 75, up 1.8 from last month but well off July’s readings of 85.

It’s hard to read the tea leaves with this much activity and light volume.  The 4.375% rate should be pretty safe and some economic weakness should drop us back to 4.25%.

Jed Marquis