This week brings us the release of five economic reports, nearly all of which are considered to be highly important to mortgage rates. There is something scheduled every day except Thursday, meaning it should be a very active week for the financial and mortgage markets.
The week kicks off tomorrow with two highly important releases. The first will be February's Retail Sales data from the Commerce Department at 8:30 AM ET. This data is extremely important to the financial markets because it measures consumer spending strength. Since consumer spending makes up over two-thirds of the U.S. economy, data that is related usually has a big impact on the markets. This month's report is expected to show a rise in sales of 0.2%. If it reveals a larger increase, the bond market will likely slip and mortgage rates will move higher as it would indicate a stronger reading of economic growth. If it shows a much weaker level of spending, I expect to see bond prices rise and mortgage rates improve early tomorrow morning.
Report number two will be the Institute for Supply Management’s (ISM) manufacturing index for March at 10:00 AM ET tomorrow. This index gives us an extremely important measurement of manufacturer sentiment by surveying trade executives about business conditions. It is the first piece of data that we see each month that covers the preceding month. In other words, it is the freshest economic data each month. A reading above 50 means more surveyed executives felt business improved during the month than those who said it had worsened. This month's report is expected to show little change from February's reading of 54.2. This means that analysts think business sentiment was similar to last month's level. That would be relatively good news for the bond market and mortgage rates because rising confidence means a stronger manufacturing sector. The weaker the reading, the better the news it is for bonds and mortgage rates.
February's Durable Goods Orders is next, coming at 8:30 AM ET Tuesday. This Commerce Department report gives us a measurement of manufacturing sector strength by tracking new orders for big-ticket items, or products that are expected to last three or more years such as electronics, appliances and airplanes. This data is known to be volatile from month to month but is still considered to be of high importance to the markets. Analysts are expecting it to show a decline in new orders of approximately 1.2%. A large increase in orders would be considered negative for bonds as it would indicate strength in the manufacturing sector and could lead to higher mortgage rates Tuesday morning. Since these orders are volatile from month to month, it will take a wider variance from forecasts for it to move mortgage rates than other data requires.
The ADP Employment report is set for early Wednesday morning, which 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, using ADP's payroll processing clients as a base. 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 accurate in predicting results of the monthly government report that usually follows a couple days later. Still, because we could see at least a moderate reaction to the results, we will be watching it. Market participants are expecting it to show that 170,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.
The biggest news of the week will come early Friday morning when the Labor Department posts March's Employment report, revealing the U.S. unemployment rate, the number of jobs added or lost during the month and change in average earnings. This is arguably the single most important monthly economic report to the financial and mortgage markets. It is expected to show that the unemployment rate remained at 3.8% and that approximately 170,000 payrolls were added to the economy during the month while earnings rose 0.2%. The unemployment rate won't draw much attention unless it moves noticeably, but a much smaller than expected payroll number and softer earnings growth would be good news for bonds and could push mortgage rates lower Friday morning as it would indicate weaker than thought conditions in the employment sector of the economy.
Overall, Friday is the most important day for mortgage rates by default due to the Employment report. However, tomorrow has two highly influential reports scheduled so it may also be an active day. The calmest day for rates will probably be Thursday unless something unexpected happens. The benchmark 10-year Treasury Note yield failed to stay below 2.37% last week. This is a very important level to watch because rates tend to track bond yields. The data we have this week carries enough significance to do that, but until the level is actually broken it would be prudent to take a cautious approach towards interest rates and locking a rate if closing soon.