Market Commentary

Updated on October 17, 2024 10:09:14 AM EDT

September's Retail Sales report was this morning's key economic release. It revealed consumers spent much more last month than many had thought. The 0.4% increase in overall sales was slightly higher than forecasts of 0.3%. However, a secondary reading that excludes more costly and volatile auto transactions rose 0.5%, greatly exceeding expectations of up 0.1%. This is bad news for bonds and mortgage rates because consumer spending drives broader economic growth. That category makes up about 70% of the U.S. economy and mortgage-related bonds tend to become less attractive to investors when the economy is stronger.

Today's second 8:30 AM ET economic report was last week's unemployment update that showed only 241,000 new claims for jobless benefits were made. This was well below predictions of 260,000 and a decline from the previous week's revised number of 260,000. Declining claims are a sign of strength in the employment sector. Accordingly, this data is good news for stocks and bad news for bonds and mortgage pricing.

We also got a measure of manufacturing activity at 9:15 AM ET. September's Industrial Production data indicated output at U.S. factories, mines and utilities was softer than expected for the past two months. Output fell 0.3% last month while August's production was changed from up 0.8% to up only 0.3%. Both readings hint that some manufacturing activity is softer than analysts thought. This is good news for the bond market, but it is the least important of the morning's three releases. The markets are trading on the early morning headlines instead of this data.

Tomorrow has just one minor economic report scheduled. The Commerce Department will post September's Housing Starts report at 8:30 AM ET. This data will probably not have a heavy impact on the bond market or mortgage rates. It gives us a sign of housing sector strength and future mortgage credit demand by tracking new home groundbreakings. However, it is considered to be of low importance to the financial and mortgage markets. Analysts are expecting it to show little change in new home starts between August and September. Due to the lack of market importance, we need to see a significant surprise in this data for it to have a noticeable influence on tomorrow's mortgage rates.

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