This holiday-shortened week brings us only four economic reports and other events to drive the markets and mortgage rates, but one of them is considered to be highly important. It is a shortened week with the markets closed today for the Independence Day holiday.
The Commerce Department will post May's Factory Orders data late Tuesday morning, which is similar to the Durable Goods Orders report that was released last week. The biggest difference is that this week's report covers both durable and non-durable goods. It usually doesn't have as much of an impact on the bond market as the durable goods data does, but can lead to changes in mortgage pricing if it varies greatly from forecasts because it measures manufacturing sector strength. Current expectations are showing a 0.9% decline in new orders from April's levels. A larger decline in orders would be considered good news for the bond market and could help lower mortgage rates slightly Tuesday.
Wednesday has no relevant economic data set for release, but the afternoon has the minutes from the last FOMC meeting. There is a possibility of the markets reacting to them following their 2:00 PM ET release. I don't believe that they will reveal anything surprising from the last FOMC meeting and during Chairperson Yellen's press conference that followed. Still, market participants will be looking for any indication of when the Fed will make their next rate increase that is currently expected sometime this year. The minutes will tell us how members voted for related motions and could cause more volatility in the markets if there is anything unexpected in them. It is worth noting that this meeting took place before Britain’s vote to leave the European Union.
Thursday’s only monthly report will be released before the markets open. June’s ADP Employment report will be posted at 8:15 AM ET. It has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. This report tracks changes in private-sector jobs of the company's clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not very accurate in predicting results of the monthly government report that follows a couple days later. Still, because we sometimes see a noticeable reaction to the report, it is on this week's calendar. It is expected to show 152,000 new payrolls. Ideally, the bond market would prefer to see a much smaller increase.
The last data of the week is arguably the single most important report we see each month. The Labor Department will post June's unemployment rate, number of new payrolls added or lost and average hourly earnings early Friday morning. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, a large decline in payrolls and no change in earnings. Weaker than expected readings would likely help boost bond prices and lower mortgage rates Friday. However, stronger than expected readings could be extremely detrimental to mortgage pricing. Analysts are expecting to see the unemployment rate rise .1% to 4.8%, with 175,000 jobs added and a 0.2% rise in earnings.
Overall, I am expecting to see a fairly quiet first day or so, but activity pick up drastically late in the week. The most important day is Friday, but the stock markets will also heavily affect trading if they rally or go into a sell-off during the week. The U.S. financial and mortgage markets are closed today and will reopen for regular trading Tuesday. I believe we will have another active week for rates and the markets, but maybe not as volatile as we saw last week. We would also like to take this opportunity to wish all of our readers a happy and safe holiday!