Market Commentary

Updated on November 14, 2019 10:23:18 AM EST

October's Producer Price Index (PPI) was released at 8:30 AM ET, revealing a 0.4% rise in the overall reading and a 0.3% in the core data. Both readings exceeded forecasts by 0.1%, meaning inflationary pressures at the producer level of the economy were a bit stronger than expected. That is bad news for bonds and mortgage rates, but the bond market doesn't seem to be concerned with the results fortunately.

We also have day two of Chairman Powell's congressional testimony taking place this morning. It shouldn't cause much of a reaction in the markets unless something unexpected is said during the Q&A portion of the proceeding.

Tomorrow has two economic reports set for release, one of which is considered to be highly important. That would be October's Retail Sales data at 8:30 AM ET. This data measures consumer level or retail spending. It is considered extremely important to the markets because consumer spending makes up over two-thirds of the U.S. economy. It is expected to show a 0.2% increase in sales, meaning consumers spent a little more last month than they did in September. A larger increase in spending would be considered negative news for bonds because rising spending fuels economic growth and raises inflation concerns in the bond market. If the report reveals a decline that indicates consumers spent less than thought, bonds should react favorably, pushing mortgage rates lower. If it shows a larger rise, mortgage rates will likely move higher.

Industrial Production data for October will close this week's calendar at 9:15 AM ET tomorrow. This report will give us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Forecasts are calling for a 0.4% decline in production, indicating moderate weakness in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this report is not expected to greatly influence the markets. Therefore, we can expect the sales data to draw the most attention tomorrow morning.

 ©Mortgage Commentary 2019


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