This holiday-shortened week has seven monthly and quarterly economic reports set for release that may influence mortgage rates. All of the releases come over just three days due to the holiday. None of them are considered to be key pieces of data but several carry enough importance to cause a noticeable change to mortgage pricing if they show surprises. Tomorrow is the only day of the week that does not have a relevant report scheduled.
Before getting into this week’s calendar, it is worth referencing news late today that Congress has reached a deal on another stimulus package. The $900 billion package includes direct payments to citizens along with programs to help businesses, renters and vaccine distribution in addition to other objectives to support the economy. The cost of the package is far less than the one the House of Representatives passed months ago. Because the size is smaller than some traders had feared, the bond market may not react as negatively as previously expected. It will be interesting to see how the markets react to the news tomorrow morning.
Starting this week’s activities will be the second revision to the 3rd Quarter Gross Domestic Product (GDP) reading. The GDP is the total of all goods and services produced in the U.S. and the benchmark reading of economic growth. However, this data likely will not have an impact on mortgage rates unless it varies greatly from its expected reading. Last month's first revision showed that the economy rebounded at a 33.1% annual pace during the quarter, unchanged from the initial estimate. This month's update is expected to show the same rate of growth. A revision higher would be considered bad news for bonds. But since this data is quite aged at this point and 4th quarter numbers will be posted next month, this release likely will not affect Tuesday’s rates.
The Conference Board will post their Consumer Confidence Index (CCI) for December at 10:00 AM ET Tuesday. This is a moderately important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial and employment situations, they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely by market participants and can affect mortgage rate direction. Current forecasts are calling for a rise in confidence from November's reading of 96.1, meaning consumers felt a little more optimistic about their own financial situation than they did last month. The lower the reading, the better the news it is for bonds and mortgage pricing.
Tuesday’s third report will come from National Association of Realtors, who will release November’s Existing Home Sales data at 10:00 AM ET. It is expected to show there was little change in home resales last month, indicating a flat housing sector. A sizable decline in sales would be considered positive for bonds and mortgage rates because a softening housing market makes broader economic growth more difficult. However, unless the sales figures vary greatly from forecasts, the results will probably have only a minor impact on rates.
Following the three reports released Tuesday, we will get another three Wednesday morning. They start with November's Personal Income and Outlays data at 8:30 AM ET. It tracks consumer ability to spend and current spending habits. Since consumer spending makes up such a large part of the U.S. economy, any related data usually has an impact on the markets and mortgage pricing. Current forecasts are calling for a 0.2% decline in income and a 0.2% drop in spending. This report also includes the Fed's preferred inflation reading (PCE index), helping to elevate the report's importance. If it reveals weaker than expected readings, we should see the bond market improve and mortgage rates drop slightly Thursday morning.
Next up is November's New Home Sales data at 10:00 AM ET Wednesday. This report gives us a measurement of housing sector strength and mortgage credit demand. It is the sister report of Tuesday's Existing Home Sales report but covers a much smaller portion of the housing market and carries less significance. A weakening housing sector is considered good news for the bond market and mortgage rates because broader economic growth is less likely in the immediate future if housing is soft. Since bonds tend to thrive in weaker economic conditions, a large decline in sales would be considered favorable for bond prices and mortgage rates. Current forecasts are calling for a lower number of sales than October.
The final report of the day will be the revised University of Michigan Index of Consumer Sentiment for December at 10:00 AM ET. Analysts are expecting to see a reading of 80.5, down from the initial 81.4 estimate that was announced earlier this month. This means surveyed consumers felt a little worse about their own financial and employment situations than previously estimated. Bond traders would prefer to see a large decline because waning confidence usually means consumers are less likely to make a large purchase in the near future, restricting economic growth. Therefore, the lower the reading, the better the news it is for mortgage rates.
Thursday is a shortened trading day with many firms working with a skeleton staff, but we will still get two pieces of economic data that may influence the markets. In addition to weekly unemployment figures, November's Durable Goods Orders will also be posted at 8:30 AM ET. This data gives us an important measurement of manufacturing sector strength by tracking orders for big-ticket items or products that are expected to last at least three years such as appliances, airplanes and electronics. Analysts are expecting the report to show a 0.7% rise in new orders. A decline in new orders would indicate that the manufacturing sector was weaker than many had thought. That would be good news for the bond market and should help push mortgage rates lower. However, this data is known to be quite volatile from month-to-month though, meaning it is not unusual to see large headline numbers from this report.
The stock markets will close at 1:00 PM ET Thursday ahead of the Christmas Day holiday while bonds will trade until 2:00 PM. All the markets will be closed Christmas Day and will reopen for regular trading Monday morning. We sometimes see pressure in the bond market ahead of the long weekends as traders look to protect themselves from headlines during the extended closing. Furthermore, with the holiday falling on Friday, easily creating a long weekend, we can expect thin trading in bonds and mortgage securities Thursday as many traders will be heading home. That scenario can create a stronger reaction to economic news and other headlines than we would normally see on a regular trading day.
Overall, Tuesday or Wednesday are likely to be the most active day of the week. No particular day stands out as calmest day for rates though. With the stimulus news breaking tonight, we could see a noticeable move in rates tomorrow despite no relevant economic data scheduled. There is little doubt that we will see an active week in the markets and possibly mortgage rates. Accordingly, it would be prudent to watch the markets if still floating an interest rate and closing in the near future.