Daily Rate Lock Advisory

Indexes Affecting Rate Lock

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Employment Cost Index (Quarterly)

Activities begin early Tuesday morning with the release of the 1st Quarter Employment Cost Index (ECI). This index tracks employer costs for wages and benefits, giving us a measurement of wage-inflation. A large increase in costs means employers will need to pass those increases into the pricing of their products and services. This is bad news for bonds and mortgage rates. A smaller increase than the 1.0% rise that market participants are predicting would be good news.

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Consumer Confidence Index

Also Tuesday is the release of April's Consumer Confidence Index (CCI). The CCI is considered to be an indicator of future spending by consumers. The Conference Board surveys 5,000 consumers from across the country about their personal financial situations. If sentiment is strong or rising, it is believed that consumers are more apt to make large purchases in the near future. However, if they are concerned about issues such as job security or income, they will probably delay making large purchases. The latter is better for the bond market and mortgage rates because the potential slowdown in spending would help to restrict economic growth. Forecasts show a 1-point decline from March's 104.7. The smaller the reading, the better it is for mortgage pricing.

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ADP Employment

Wednesday's schedule starts with the ADP Employment report at 8:15 AM ET. It tracks changes in private-sector jobs, using ADP's clients that use them for payroll processing as a base. While it does draw attention, it is overrated and is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that follows a couple days later. Still, because we do often see a reaction to the report, we should be watching it. Analysts are expecting it to show that approximately 190,000 private sector payrolls were added to the economy last month. A smaller number would be good news for rates.

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ISM Index (Institute for Supply Management)

The Institute for Supply Management (ISM) will post their manufacturing index for April at 10:00 AM ET Wednesday. This highly important report gives us insight into manufacturer sentiment on business conditions. A reading above 50 means that more surveyed trade executives felt business improved during the month than those who felt it had worsened. It broke above that threshold last month for the first time since September 2022. Analysts are expecting to see a reading of 50.1, down slightly from March's 50.3. Bond traders would prefer to see a decline from March's level, which would signal the manufacturing sector weakened during the month.

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Federal Open Market Committee (FOMC) Statement

This week's FOMC meeting will begin Tuesday and adjourn Wednesday afternoon. The overwhelming consensus is that Chairman Powell and friends will leave key short-term interest rates at their current levels since the downward trend in inflation seems to have slowed or stalled. The meeting will adjourn at 2:00 PM ET, followed by a press conference at 2:30 PM with Chairman Powell. This one does not include revised economic projections. It may not be the Fed's lack of action that fuels afternoon market volatility though. It wasn’t too long ago that it was this meeting that was predicted to yield a rate cut, which was pushed further and further later in the year as inflation numbers appeared stronger than expected. It has gotten to the point where there is some chatter that a rate hike may actually come before that reduction if inflation doesn’t start moving lower again. Traders will be looking closely at their words about future moves, and it is that topic that will likely drive trading Wednesday afternoon.

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Productivity and Costs (Quarterly)

Thursday’s data is much less influential than Wednesday and Friday’s events. In addition to the weekly unemployment update, 1st Quarter Productivity and Costs data is also set for release at 8:30 AM ET. This information helps us measure employee productivity in the workplace. High levels of productivity allow for low-inflationary economic growth. This update will likely be a non-factor for rates though unless it shows a significant variance from forecasts. Productivity is expected to have slipped 1.0% while labor costs reading rose 3.0%. Good news for mortgage pricing would be a stronger rate of productivity and a smaller rise in labor costs.

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Factory Orders

March's Factory Orders report is set for release at 10:00 AM ET Thursday morning. This data is similar to the Durable Goods Orders report that was posted last week, except it includes orders for both durable and non-durable goods. It will also give us a measurement of manufacturing sector strength but is considered to be only moderately important to the bond and mortgage markets. That is partly because a big portion of the data was already released with the Durable Goods Orders report. The report will likely have a minimal impact on Thursday's mortgage rates, even if it shows a much smaller than expected 1.6% increase in orders.

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Employment Situation

The most important economic news of the week will come early Friday morning when April's Employment report is posted, revealing the U.S. unemployment rate, the number of jobs lost during the month and earnings data. This is an extremely influential report to the financial and mortgage markets. It is expected to show that the unemployment rate held at 3.8% and that approximately 245,000 jobs were added during the month, while earnings rose 0.3%. A higher unemployment rate and a much smaller increase in the payroll and earnings numbers would be good news for bonds and rates because they would indicate weaker than thought conditions in the employment sector of the economy. Stronger than expected results will probably lead to bond selling, possibly causing a sizable increase in mortgage pricing Friday.

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Overall, it is going to be an interesting week for the markets and mortgage rates. We can expect to see plenty of movement in rates Wednesday and Friday. The calmest day for rates could be Tuesday. Due to the number of highly-influential events taking place this week, it would be prudent to keep a close eye on the markets if still floating an interest rate and closing in the near future.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

Employment Cost Index (Quarterly)

Consumer Confidence Index

ADP Employment

ISM Index (Institute for Supply Management)

Federal Open Market Committee (FOMC) Statement

Productivity and Costs (Quarterly)

Factory Orders

Employment Situation

none

Float / Lock Recommendation