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Monday, January 30, 2023

Market Commentary

Updated on January 30, 2023 10:04:32 AM EST

There is nothing of importance scheduled for today, the only day of the week without at least one item. The rest of the week brings us seven relevant monthly and quarterly economic reports that may influence mortgage pricing, along with an FOMC meeting. A couple of the reports are considered to be highly important while others are of moderate or low importance.

Starting this week’s activities is the release of the 4th Quarter Employment Cost Index (ECI) at 8:30 AM ET tomorrow. This index measures employer costs for employee wages and benefits, giving us insight into wage inflation pressures. If wages are rising, consumers have more money to spend and businesses usually need to charge more for their products and services. The report is considered moderately important and usually has more of an impact on the bond market than the stock markets. Current forecasts are showing an increase of 1.1%. A reading lower than expected would be favorable to bonds and mortgage rates.

Januarys Consumer Confidence Index (CCI) is also set for tomorrow, coming at 10:00 AM ET. The CCI is an indicator of consumer sentiment, which is important because waning confidence in their own financial situations is a sign that consumers are less willing to make large purchases in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, market participants are very attentive to related data. Analysts are expecting to see a slight decline from Decembers 108.3 reading, indicating consumer confidence was weaker this month than last month. A reading much smaller than the expected 108.1 would be ideal for the bond market and mortgage rates. A higher reading would mean that consumers are more likely to spend in the immediate future, fueling economic growth and possibly pushing mortgage pricing higher.

Besides the economic data and FOMC meeting this week, we also need to watch for movement in stocks. It is still considered corporate earnings season and there are a couple of big-named companies reporting their results this week. Generally speaking, good news for stocks is considered bad news for bonds and mortgage rates. If those earnings reports show disappointing results, stocks should retreat, drawing funds into bonds. This scenario can happen anytime but may be a little more prevalent this week than others.

Overall, Wednesday is the best candidate for most important day of the week due to the ISM Index and FOMC meeting, but the Employment report makes Friday a possibility also. Everything points towards another very active week for the markets and mortgage rates, so it would be prudent to keep an eye on them if still floating an interest rate and closing in the near future.

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