There is not as many economic releases for the markets to digest this week as there are many other weeks, but a good part of what is scheduled is very important. It begins and ends with extremely important economic releases. There are five reports we will be watching with something of relevance taking place four of five days, meaning we should see multiple days with changes to rates.
The week starts tomorrow with a major release. November's Institute for Supply Management's (ISM) manufacturing index will be posted at 10:00 AM ET. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. Current forecasts call for an increase in sentiment from October to November. October's reading was announced as 48.3. A weaker reading than the expected 49.2 would be good news for the bond market and mortgage rates while anything above 50.0 means that more surveyed business executives felt business improved during the month than those who felt it had worsened. The lower the reading the better the news it is for bonds because waning sentiment indicates a slowing manufacturing sector and makes broader economic growth less likely.
Tuesday has nothing of importance scheduled, but Wednesday has November’s ADP Employment report set for release at 8:15 AM ET. This report has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. It tracks changes in private-sector jobs using the company'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 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. Analysts are expecting to see 145,000 new private-sector payrolls last month. A weaker number of payrolls would be good news for mortgage rates.
October's Factory Orders report will come late Thursday morning. This Commerce Department report is similar to the Durable Goods Orders report that was released last week, except this one includes new orders for both durable and non-durable goods. This release usually doesn't have a significant influence on bond trading since a good portion of the data has previously been made public. Analysts are expecting to see a 0.3% rise in new orders. Favorable news would be a weaker reading because it would signal softer than expected manufacturing sector activity that makes mortgage-related bonds more appealing to investors.
The biggest news of the week will be released early Friday morning when the Labor Department posts November's Employment figures. This is arguably the most important monthly report we see, so its impact on the markets and mortgage rates is often significant. It is comprised of many statistics and readings, but the most watched are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate of 3.6% while 180,000 new jobs were added to the economy. The income reading is forecasted to show an increase of 0.3%. An ideal scenario for mortgage shoppers would be a higher unemployment rate, a much smaller increase in payrolls (or a decline) and no change in the earnings reading. If we hit the trifecta with all three, we should see bond prices rise and mortgage rates move noticeably lower Friday. However, stronger than expected readings may fuel bond selling that would lead to higher mortgage rates.
The final report of the week is the release of December's preliminary reading to the University of Michigan's Index of Consumer Sentiment late Friday morning. This index measures consumer willingness to spend and can usually have enough of an impact on the financial markets to change mortgage rates slightly if it shows a sizable miss from forecasts. Consumer sentiment or confidence is tracked because the more comfortable consumers are about their own financial situations, the more likely they are to make a large purchase in the near future. Since consumer spending makes up such a large part of our economy, any related data is watched closely. Friday's release is expected to show a reading of 96.5, which would be a slight decline from last month's final reading of 96.8. A large decline in confidence would be favorable news. However, the Employment report will be the center of attention Friday as it carries much more importance in the markets.
Overall, Friday is the most important day of the week due to the importance of the Employment report. Tomorrow may also be an active day for rates following the long holiday weekend and the release of the ISM index. The calmest day will likely be Tuesday unless something unexpected happens. It will probably be a fairly active week for rates, meaning it would be prudent to watch the markets if still floating an interest rate and closing in the near future.