This week brings us the release of four economic reports for the markets to digest with two of those reports being much more important than the others. In addition to the data, there are also a high number of speaking engagements by Federal Reserve members that may draw attention, including one with Fed Chairman Powell. For the week we can expect to see a fair amount of movement in rates, but the moves likely will come over just a couple days.
The first release of the week will come from the Institute for Supply Management (ISM), who will post their manufacturing index at 10:00 AM ET Tuesday. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength. It is considered to be one of the more important reports we see each month, partly because it is the first report that tracks the preceding month's activity. Tuesday's release is expected to show a September reading of 50.0, indicating that manufacturer sentiment strengthened from August's 49.1 reading. This means more surveyed executives felt business improved during the month than in August, hinting at a stronger manufacturing sector. A smaller than expected reading would be good news for bonds and likely lead to lower mortgage rates Tuesday.
The second report of the week will be September's ADP Employment report before the markets open Wednesday. It has the potential to cause some movement in the markets if it shows much stronger or weaker numbers than expected. 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 follows a couple days later. Still, because we have seen reaction to the report, we should be watching it. Analysts are expecting it to show that 150,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.
August's Factory Orders data will be released late Thursday morning. This Commerce Department report is similar to last Friday's Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a slight rise in new orders. A large decline would be good news for the bond market and mortgage rates while a larger than unexpected rise would be bad news and could push rates slightly higher Thursday morning since it would indicate economic strength.
The last report of the week is the most important. Friday brings us the release of the monthly Employment report. The Labor Department will post September's employment stats early Friday morning. The report is comprised of many statistics and readings, but the most important are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for the unemployment rate to hold at 3.7%, an increase in payrolls of approximately 150,000 and a 0.3% increase in average earnings. Weaker than expected readings should rally bonds enough to improve mortgage rates, especially if the stock markets react poorly to the news.
Overall, Friday is likely to be the most active day for mortgage rates, but Tuesday is important also. Tomorrow or Thursday are best candidates for calmest day. Despite the lack of a large number of economic releases, we still should see a considerable amount of movement in mortgage rates this week. The two big reports scheduled can be market movers, meaning those are days that mortgage rates could drop noticeably or spike higher. However, something unexpected can happen at anytime that creates chaos in the markets. That is why it is prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.