Updated on April 26, 2024 10:06:28 AM EDT
This morning’s big news was March’s Personal Consumption Expenditures (PCE) index readings that were in the monthly Personal Income and Outlays report. Both the overall and core PCE readings matched forecasts of a 0.3% monthly rise, but the year-over-year versions rose 0.1% more than expected. These readings are highly relevant because they are the Fed’s preferred inflation gauges. The numbers indicate the retraction in inflation seems to have stalled, raising the question again of what the Fed will do next with monetary policy and when they may act. Still, it appears that yesterday’s GDP data scared bond traders into thinking today’s readings would be stronger than they actually were. Accordingly, we are seeing more or less a sigh of relief rally in today’s trading.
The other headline numbers in this report showed personal income rising 0.5%, as expected, but consumer spending jumped 0.8% when predictions had it at 0.6%. Since consumer spending makes up over two-thirds of the U.S. economy, March’s number points towards stronger economic activity. Therefore, we consider this portion of the report as negative for mortgage rates even though we are seeing a fairly strong open in bonds this morning.
Closing out this week’s calendar was April’s revised Index of Consumer Sentiment from the University of Michigan. They announced a reading of 77.2, falling from the initial estimate of 77.9 earlier this month. The lower reading means surveyed consumers were a little less optimistic about their own financial situations than previously thought. Weaker confidence is good news for bonds and mortgage rates because it usually translates into softer consumer spending numbers.
Next week is quite busy with a lengthy list of scheduled events, several of which are considered extremely important to the financial and mortgage markets. It starts light with nothing of relevance set for Monday, followed by two moderately important releases Tuesday morning. From there it gets active quickly with a slew of things scheduled over the remaining days that will undoubtedly cause volatility in the markets. We will get the new month data such as the ISM manufacturing index and the almighty monthly Employment report that are usually released the first business day and first Friday of each month respectively. In addition to a few more economic reports there is also another FOMC meeting taking place that we need to be concerned about. It is a safe bet that we will see plenty of movement in the major market indexes and mortgage rates. Look for details on all of next week’s activities in Sunday evening’s weekly preview.
©Mortgage Commentary 2024