This week brings us the release of five monthly economic reports for the markets to digest, but only one is considered to be highly important. All of the week’s releases come during the middle and latter days though. We do have some Fed speaking engagements and corporate earnings releases this week that may come into play also. And let’s not forget about the trade standoff with China that waned in influence late last week. It can easily come to the forefront and heavily impact the markets if there is an progress.
Wednesday starts the week's economic activities with two monthly reports. The first will be April's Retail Sales at 8:30 AM ET. This is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up over two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.2% increase in sales from March to April. A weaker than expected level of sales should push bond prices higher and mortgage rates lower Wednesday morning as it would signal that economic activity may not be as strong as thought. However, a larger than expected increase could fuel concerns of economic growth and inflation that would lead to bond selling, pushing mortgage rates higher.
The second piece of data Wednesday is April's Industrial Production report at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.1% increase in production, indicating that manufacturing activity strengthened modestly. A decline in output would be good news for the bond market and mortgage rates because it would show that the manufacturing sector is not as strong as thought. This report is considered to be moderately important, so it will likely need to show noticeable strength or weakness to cause movement in mortgage rates.
April's Housing Starts will be released early Thursday morning. This data gives us an indication of housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show an increase in new starts from March's reading, hinting at housing sector growth. However, since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts.
Friday has two monthly reports scheduled, both coming at 10:00 AM ET. April's Leading Economic Indicators (LEI) is one. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.2% increase from March's reading, meaning that the indicators are predicting activity is likely to strengthen modestly over the next few months. A decline would be good news for the bond market and mortgage rates, while a larger increase could cause mortgage rates to inch higher.
May's preliminary reading to the University of Michigan's Index of Consumer Sentiment will close out the week's calendar Friday. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident in their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 97.0, which would be a small decline from April's final reading of 97.2, indicating consumers are less confident than last month. If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower because waning confidence means consumers are likely to spend less.
Overall, Tuesday may be the calmest day for rates. Wednesday looks to be the most important day due to the Retail Sales report, but we can see the markets get active at any time because of a variety of reasons. Therefore, please proceed cautiously if still floating an interest rate and closing in the near future.