Santa Fe Las Campanas Market Overview

Tuesday’s bond market has opened in positive territory as last week’s stock rally seems to have last some momentum. The stock markets are kicking the week off with minor losses. The Dow is currently down 19 points while the Nasdaq has slipped 2 points. The bond market is currently up 11/32, which should improve this morning’s mortgage rates by approximately .125 – .250 from Friday’s afternoon pricing..
Today’s only relevant economic data came from the Commerce Department, who said that May’s Factory Orders rose 0.8%. This was weaker than expected, making it good news for the bond market and mortgage rates. However, the 0.2% difference between forecasts and the actual increase is not enough of a difference to influence many opinions about the strength of the manufacturing sector.
This morning’s bond strength does not come as a complete surprise. With the beating that bonds took last week, it is somewhat expected that we see a day or two of strength. This is especially true if the stock markets do not rally or sell-off. Accordingly, we may see some improvement in mortgage rates the next day or so. However, those improvements should not be misconstrued as a new downward trend. Please proceed cautiously if still floating an interest rate. This strength may only be temporary.
Tomorrow has a couple of reports that likely will not directly influence mortgage rates unless they show significant surprises, but since it is a light week they are worth mentioning. The first two are employment-related releases from private-sector entities. They will give us different opinions on the labor market, but unless they show surprising strength or weakness, they will probably have little impact on mortgage rates tomorrow morning.
The Institute for Supply Management (ISM) will post their Services Index for June late tomorrow morning. This index is somewhat similar to last Friday’s ISM Manufacturing Index but tracks sentiment at the services level. It has the potential to impact bond trading and mortgage rates if it shows a sizable variance from forecasts, particularly when little other data is being posted. However, it usually has little influence on mortgage pricing and cannot be considered a key report. Current forecasts are calling for a reading of 54.0, which would be a decline from May’s reading.
Overall, I am expecting to see a fairly quiet first part of the week for mortgage rates, but activity will likely pick up drastically late in the week. The most important day is Friday due to the almighty monthly Employment report, but the stock markets will also heavily affect trading this week if they show significant losses or gains.