This week has five monthly economic reports that may affect mortgage rates in addition to a Treasury auction midweek. We can also expect stocks to influence bond trading and mortgage pricing if they are active. Election influences are likely behind us now, but don’t be surprised to see COVID headlines come into play in the immediate future as cases seem to be rising. The week starts and ends light with nothing of importance scheduled for tomorrow or Friday.
The week’s activities start Tuesday morning when the Commerce Department gives us October's Retail Sales data at 8:30 AM ET. This data tracks consumer level or retail spending and is considered extremely important to the markets because consumer spending makes up over two-thirds of the U.S. economy. It is expected to show a 0.5% increase in retail-level spending, meaning consumers spent a little more last month than they did in September. A larger increase in spending would be considered negative news for bonds because stronger spending fuels economic growth and raises inflation concerns in the bond market. If Tuesday's report reveals a decline that indicates consumers spent less than thought, bonds should react favorably, pushing mortgage rates lower.
Industrial Production data for October will also be released Tuesday morning. The 9:15 AM ET report will give us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Forecasts are calling for a 0.9% rise in production, indicating strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this report is not expected to greatly influence the markets. Therefore, we can expect the sales data to draw the most attention Tuesday morning.
Wednesday has a morning and afternoon event that we will be watching. First up is October's Housing Starts that shows housing sector strength and future mortgage credit demand, but usually does not have a noticeable impact on mortgage rates. I don't expect this month's version to be any different unless it varies greatly from analysts' forecasts. They are calling for an increase in new home groundbreakings, meaning the new home portion of the housing sector strengthened a little last month. Favorable news for rates would be a decline in starts.
The afternoon event is the 20-year Treasury Note auction that will show investor demand for long-term securities. If demand is strong in the sale, particularly from international buyers, we could see the broader bond market improve after results are posted at 1:00 PM ET. On the other hand, lackluster interest in the securities may lead to an upward revision to rates before the end of the day.
Next up is October's Existing Home Sales data at 10:00 AM ET Thursday. The National Association of Realtors will give us this release, which shows the status of the housing sector and mortgage credit demand by tracking home resales in the U.S. This report is expected to show a small decline in sales, meaning the housing sector softened slightly last month. That would be relatively good news for the bond market and mortgage pricing because a slowing housing sector makes broader economic growth less likely. But unless it shows a significant surprise, it will likely not have a major impact on Thursday's rates.
Also set for release late Thursday morning is the Leading Economic Indicators (LEI) report for October. This Conference Board release is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.7% rise, meaning economic activity will likely strengthen over the next several of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to miss forecasts by a wide margin for it to affect mortgage rates.
Overall, Tuesday looks to be the most important day of the week for rates due to the Retail Sales report, while Friday is best candidate for calmest unless something unexpected happens. Despite the lack of several highly important reports, we still should see plenty of movement in the markets and mortgage rates as there are several factors that may drive trading. Therefore, please proceed cautiously if closing in the near future and still floating an interest rate.