This week has five economic reports scheduled for release that have the potential to influence mortgage rates, one of which is considered to be very important. We are in earnings season also, where corporations post their quarterly earnings and projections. Strong earnings reports should fuel a stock rally that pressures bonds and leads to higher mortgage rates. However, disappointing earnings news should make bonds more attractive to investors and lead to rate improvements.
The Commerce Department will start the week’s activities with the release of March's Retail Sales data at 8:30 AM ET tomorrow morning. This piece of data gives us a measurement of consumer spending, which is very important because consumer spending makes up over two-thirds of the U.S. economy. Forecasts are calling for a 0.4% rise in sales from February to March. If we see a larger increase in spending, the bond market will likely fall and mortgage rates will rise as it would indicate consumers are spending more than thought, fueling economic growth. On the other hand, a weaker than expected reading in sales could push bond prices higher and mortgage rates lower.
Tuesday has two pieces of data, beginning with March's Housing Starts at 8:30 AM ET. This report tracks groundbreakings of new home construction, giving us a measurement of housing sector strength and future demand for mortgage credit. It is not considered to be highly important to the markets but does draw enough attention to influence trading if it reveals surprisingly strong or weak numbers. The report is expected to show an increase in starts last month. Good news for mortgage rates would be a sizable decline in starts that points toward housing sector weakness.
Also Tuesday morning will be the release of March's Industrial Production data at 9:15 AM ET. It tracks output at U.S. factories, mines and utilities, translating into an indication of manufacturing sector strength. Current forecasts are calling for 0.3% increase in production from February's level. This data is considered to be only moderately important to rates, so it will take more than just a slight variance to influence bond trading and mortgage pricing. Signs of manufacturing sector strength are considered negative news for mortgage rates, while a decline in output would be favorable news for the bond market and mortgage shoppers.
Wednesday's only relevant release comes during afternoon hours. That is when the Federal Reserve's Beige Book report will be posted. This report is named simply after the color of its cover but details economic conditions throughout the U.S. by Fed region. Since the Fed relies heavily on the contents of this report during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any significant surprises. Generally speaking, signs of strong economic growth or inflation rising from the last update would be considered negative for bonds and mortgage rates. Slowing economic conditions with little sign of inflationary pressures would be ideal for mortgage rates. The report will be released at 2:00 PM ET, so any reaction will come during mid-afternoon trading.
Next up is the Conference Board's Leading Economic Indicators (LEI) for March. This data attempts to predict economic activity over the next three to six months. It is also considered to be only a moderately important report, so at best we can expect to see a slight movement in rates as a result of this data. It is expected to show a 0.4% increase from February's reading, meaning it is predicting moderate growth in economic activity over the next several months. A decline would be considered good news for the bond market and could lead to slightly lower mortgage rates Thursday.
Overall, it is likely to be another active week for mortgage rates. Tomorrow has the single most important release of the week, so it is a good candidate for most important day. However, with corporate earnings starting to flow, they can take centerstage if there is an overwhelmingly weak or strong trend in the results of some of the big-name companies. That means any day could end up being the most active. The least important day of the week looks to be Friday. Unlike most weeks, the most important events are set for release the earlier days. Therefore, there is a good chance of seeing the most movement in rates the early part of the week.