This week has five monthly economic reports scheduled for release that have the potential to influence mortgage rates in addition to the weekly unemployment update that has recently drawn a lot of attention. One of the monthly reports is considered to be very important to the markets. The week starts off slow with no data tomorrow or Tuesday.
Wednesday has three reports set for release, including the most important of the week. That will come from the Commerce Department, who will release March's Retail Sales data at 8:30 AM ET. This piece of data gives us a measurement of consumer spending, which is extremely important because consumer spending makes up over two-thirds of the U.S. economy. Forecasts are calling for a large decline from February to March, somewhere between 7 and 13%. The weaker the level of consumer spending, the better the news it is for bonds and mortgage rates.
March's Industrial Production data will be posted at 9:15 AM ET Wednesday. It tracks output at U.S. factories, mines and utilities, translating into an indication of manufacturing sector strength. Analysts are expecting to see a 3.7% decline in production. This data is considered to be only moderately important to rates. Since it comes on a day with a couple other releases, don’t expect too much of a reaction to it.
The final release of the day comes during afternoon hours, when the Federal Reserve's Beige Book report will be posted. This report is named simply after the color of its cover but provides opinion on 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. This release is expected to show considerable weakness since the last update due to the coronavirus impact. The report will be released at 2:00 PM ET, so any reaction will come during mid-afternoon trading.
Thursday has a single monthly report that is considered to be of low importance to the markets in addition to the weekly unemployment update. March's Housing Starts is scheduled for 8:30 AM ET, which tracks groundbreakings of new home construction and gives us a measurement of housing sector strength. The report is expected to show a sizable decline in new starts last month.
Leading Economic Indicators (LEI) for March will be posted at 10:00 AM ET Friday. This Conference Board index attempts to predict economic activity over the next three to six months. It normally is 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 7% decline from February's reading, meaning it is predicting a huge economic slowdown over the next several months. That should not be a surprise to anyone though.
Also worth noting is that we are heading into corporate earnings season where publicly-traded companies post their quarterly earnings and forward projections. Next week will be busier than this coming week with a higher number of announcements and larger companies reporting, but this week will be the first active week of earnings since the pandemic started. This will be an opportunity for the markets to be reminded of just how badly the pandemic is affecting businesses and their earnings. Generally speaking, what is bad news for stocks is good news for bonds and could lead to lower mortgage rates. We have seen mortgage bonds stand on their own recently, not necessarily following the same direction as Treasury bonds and less influenced by stocks as they usually are. However, we still could see a big move in stocks affect mortgage rates. Accordingly, we will be watching these earnings reports and their impact on stocks this week.
Overall, it looks as if Wednesday is the most important day due to the fact that three of this week’s five monthly releases are scheduled, one of which is a major report. We also have to consider the fact that earnings can take centerstage any day. Tuesday or Thursday are best candidates for calmest day of the week. There is no reason to believe that this week will be any calmer for rates than last week. Therefore, keep an eye on the markets if still floating an interest rate and closing in the near future.