Daily Rate Lock Advisory | Americanheromortgage

Indexes Affecting Rate Lock

High

Positive

Gross Domestic Product (GDP)

Kicking off this morning’s headlines was the release of the 4th Quarter Gross Domestic Product (GDP) reading that revealed the economy slowed to a 1.4% annual rate of growth during the last three months of the year. This was much slower than the 3rd quarter’s 4.4% rate and softer than the 2.9% that was expected. Since bonds tend to thrive in weaker economic conditions, this report is clearly good news for rates.

High

Negative

Inflation News

At the same time the GDP reading was posted, we also got December's Personal Income and Outlays report. The big news to come from this report were the higher than expected Personal Consumption Expenditures (PCE) indexes, which are the Fed’s preferred inflation gauges. Both the overall and core PCE readings rose 0.4% in December, exceeding forecasts of 0.2% and 0.3% respectively. They also were hotter than predicted on an annual basis with the overall rising at a 2.9% year-over-year rate and the more important core data at a 3.0% pace. For as much as the GDP reading was favorable for rates, these readings are equally bad news for bonds and mortgage pricing.

Medium

Neutral

Personal Income and Outlays

The other readings in the morning’s second release are far less influential than the PCE numbers and showed no surprises. December’s income rose 0.3%, signaling consumers had more money to spend than in November, while spending rose 0.4%. Both pegged expectations.

Low

Positive

New Home Sales

We also had two late morning economic releases today. December’s New Home Sales report showed a 1.7% decline in sales of newly built homes after touching a 4-year high previously. Softer housing sales are usually considered favorable news for rates, but this report covers such a small portion of all U.S. housing sales that it rarely has a noticeable impact on rates.

Medium

Positive

Univ of Mich Consumer Sentiment (Rev)

Lastly, the University of Michigan announced their revised Index of Consumer Sentiment for February stands at 56.6. This is lower than the initial estimate of 57.3 earlier this month and is a sign that consumers felt a little less confident in their own financial situations than previously thought. Since waning confidence often translates into softer consumer spending that drives economic growth, we can label this report slightly favorable for bonds and mortgage rates.

Medium

Unknown

Tariff News

Also newsworthy is the Supreme Court’s released ruling that President Trump’s broadly imposed tariffs are illegal. It is unclear if refunds of previously paid tariffs would be made and if so, how they would work. More importantly, it seems the markets aren’t sure if this is good news or bad since we aren’t seeing a major move in either direction. From an inflation standpoint, it could be taken as good news since it is believed U.S. businesses and consumers took the brunt of them. That said, President Trump and his administration has said there are other ways to impose fees similar to tariffs if the Supreme Court did indeed strike them down. This is a topic we will be hearing plenty about in the coming months.

Medium

Unknown

Factory Orders

Next week is much lighter than this week was in terms of relevant economic data scheduled for release. The week starts with a moderately important Factory Orders release and ends with another important inflation index (PPI). There are also a couple of Treasury auctions and more Fed-member speeches that we will be watching. Look for details on all of next week’s activities in Sunday evening’s weekly preview.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

Gross Domestic Product (GDP)

Inflation News

Personal Income and Outlays

New Home Sales

Univ of Mich Consumer Sentiment (Rev)

Tariff News

Factory Orders

Float / Lock Recommendation