Market Comment
Mortgage bond prices finished the week near unchanged which left rates relatively flat. We started significantly worse but recovered the losses as stocks struggled the latter part of the week. The Treasury auctions were mixed with weak demand for 2 and 5-year notes but decent demand for the 7-year auction. The data was also mixed. New home sales were 759K vs 680K. Weekly jobless claims were 210K as expected. Durable goods orders rose 4.7% vs 1.5%. Q3 GDP rose 4.9% vs 4%. Personal income rose 0.3% vs 0.4%. Spending rose 0.7% vs 0.5%. Core PCE inflation rose 0.3% as expected. The tame inflation reading was much needed. Consumer sentiment was 63.8 vs 63.1. Mortgage interest rates finished the week unchanged to better by approximately 1/8 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Q3 Employment Cost Index | Tuesday, Oct 31, 8:30 am, et | Up 1.1% | Very important. A measure of wage inflation. Weakness may lead to lower rates. |
| FHFA House Price Index | Tuesday, Oct 31, 10:00 am, et | Up 0.8% | Moderately Important. A measure of single-family house prices. Weakness may lead to lower rates. |
| Consumer Confidence | Tuesday, Oct 31, 10:00 am, et | 100 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| ADP Employment | Wednesday, Nov. 1, 8:15 am, et | 145K | Important. An indication of employment. Weakness may bring lower rates. |
| Fed Meeting Adjourns | Wednesday, Nov. 1, 2:15 pm, et | No rate changes | Important. Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting. |
| Weekly Jobless Claims | Thursday, Nov. 2, 8:30 am, et | 203K | Important. An indication of employment. Higher claims may result in lower rates. |
| Preliminary Q3 Productivity | Thursday, Nov. 2, 8:30 am, et | Up 3.1% | Important. A measure of output per hour. Improvement may lead to lower mortgage rates. |
| Factory Orders | Thursday, Nov. 2, 10:00 am, et | Up 1.1% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Employment | Friday, Nov. 3, 8:30 am, et | 3.8%, Payrolls +172K | Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
No Change
The Federal Reserve meeting adjourns Wednesday afternoon. The current odds heavily favor no rate changes. The Fed’s forward guidance and the remarks from Chair Powell after the meeting will set the tone for trading in the weeks ahead.
Consumers remain resilient despite inflation impacting most everything. Analysts attribute robust spending to consumers tapping into savings. The savings rate fell from 5.2% in the second quarter to 3.8% in the third quarter. Many are concerned that this trend is not sustainable. Those concerns account for a significant part of the recent stock losses. Any upward pressure on rates will only exacerbate those concerns. The Fed has a very difficult task of fighting inflation without crushing the economy.