Today’s only economic data failed to show any type of surprise in the manufacturing sector. September’s Industrial Production report revealed a 0.2% increase in output at U.S. factories, mines and utilities. This matched forecasts and since it is considered to be of only moderate importance to the markets, it has had little impact on this morning’s trading or mortgage rates.
Tomorrow’s data is one of the more important releases of the week. September’s Producer Price Index (PPI) will be released at 8:30 AM ET. This is one of the two very important inflation readings we get each month, measuring inflationary pressures at the producer level of the economy. Analysts are expecting to see a 0.2% increase in the overall index and a 0.1% rise in the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. A larger than expected increase could raise concerns in the bond market about future inflation and lead to higher mortgage rates tomorrow. However, weaker than expected readings should result in lower rates.
Overall, it appears that tomorrow or Wednesday are the likely candidates for the most important day of the week. In addition to the release of the PPI tomorrow, Fed Chairman Bernanke will speak at a Boston Fed conference during early afternoon hours. This adds to the days’ value as his words always have the potential to cause volatility in the markets. Besides the economic reports, there are many companies posting earning reports during the week, including some big names that include Apple, IBM and Intel. If the corporate earnings releases are generally weaker than forecasts, stocks may suffer, making bonds more appealing to investors. The end result would likely be an improvement in rates. The flip side though is stronger than expected earnings that drive stocks higher, pushing bond prices lower and mortgage rates upward.