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Market Commentary

Updated on May 17, 2013 10:23:50 AM EDT
OpenClose Mortgage Software

Friday’s bond market has opened in negative territory due to stronger than expected economic news and more stock gains. The major stock indexes are showing early strength as we head into the weekend with the Dow up 55 points and the Nasdaq up 17 points. The bond market is currently down 10/32, erasing some of yesterday’s improvements. Yesterday’s gains actually started to diminish during afternoon trading, maintaining the pattern of the week. This should translate into an increase of approximately .250 of a discount from yesterday’s morning pricing. If your lender revised upward late yesterday, then you should see less of an increase in this morning’s rates.

There were two pieces of economic data posted this morning. The first was May's preliminary reading to the University of Michigan's Index of Consumer Sentiment that came in at 83.7. This was much higher than analysts had predicted and was the highest reading since July 2007. That means that surveyed consumers were much more optimistic about their own financial situations this month than many had thought. Since that means they are more apt to spend money and make large purchases, the data is negative for the bond market and mortgage rates.

The second report of the morning was April’s Leading Economic Indicators (LEI) at 10:00 AM ET. It gave us similar results with a larger than forecasted increase. The Conference Board announced that their LEI rose 0.6% last month when analysts were expecting to see a 0.3% rise. That indicates that the data is predicting a moderate rate of economic growth over the next several months, making it favorable for stocks and bad news for bonds.

Next week brings us a couple of relevant economic reports for the markets to digest in addition to the minutes from the last FOMC meeting. The highlight of the week will be Fed Chairman Bernanke’s congressional testimony on the Fed’s economic outlook that will likely be a market mover. There is nothing of importance scheduled for Monday, so look for weekend news and stock movement to drive bond trading and mortgage pricing until we get to the middle part of the week. Details on next week’s calendar will be in Sunday’s weekly preview.