Daily Rate Lock Advisory

Indexes Affecting Rate Lock

Medium

Neutral

Factory Orders

This morning’s sole relevant economic release was July's Factory Orders report at 10:00 AM ET. It showed a 1.3% decline in new orders at U.S. factories. While this is a sign of slowing manufacturing activity, the decline matched forecasts. This report also has some duplicate data that was released in last week’s Durable Goods Orders report. Accordingly, we are labeling the report neutral for mortgage rates.

Medium

Positive

Fed Talk

It is not the Factory Orders report that is driving this morning’s bond gains. Comments by St. Louis Federal Reserve President Alberto Musalem that indicate he has shifted his position regarding inflation and the need for a Fed rate cut are contributing heavily to this morning’s bond trading. He is known to be concerned about the direction of inflation and was in no rush to start cutting key short-term interest rates, at least until this morning. His words make it clear he feels differently now, pointing towards another vote for a rate cut at this month’s FOMC meeting. Fed governor Chris Waller also spoke this morning and reiterated his stance that it is time to start lowering rates. The latter came as no surprise since he was one of the two dissenting votes at the last FOMC meeting, but the fact Mr. Musalem is now in the same camp raises the possibility of seeing the Fed make a rate reduction this month.

Medium

Unknown

Fed Beige Book

There also is an afternoon release by the Federal Reserve that we will be watching today. Their Beige Book report will be posted at 2:00 PM ET, giving us details on regional economic conditions through the eyes of the Fed’s local business contacts. It is used during their FOMC meetings to help determine monetary policy. If it reveals any significant surprises or changes from the previous release, we may see movement in the financial and mortgage markets as analysts adjust their theories about what the Fed will do regarding a rate cut at this month’s FOMC meeting. Good news for mortgage rates would be weaker activity with signs of easing inflation that boosts the possibility of the Fed lowering key short-term interest rates at the upcoming meeting.

Medium

Unknown

ADP Employment

Tomorrow brings us four economic releases that have the potential to influence mortgage rates. First will be August's ADP Employment report at 8:15 AM ET. This report is usually posted on the first Wednesday of the month, but this week’s Labor Day holiday pushed its release back to tomorrow. The markets use the report as a gauge of private-sector employment strength. Analysts are expecting to see 69,000 new private-sector jobs were added to the economy last month. A number that is higher than expected would be negative news for mortgage rates while a much smaller increase would be favorable.

Medium

Unknown

Weekly Unemployment Claims (every Thursday)

The next two reports are set for release at 8:30 AM ET. Last week’s unemployment figures are expected to show 232,000 new claims for jobless benefits were made following 229,000 the week before. Rising claims indicate weakness in the employment sector, meaning the higher the number tomorrow, the better the news. That said, this is just a weekly snapshot, so it usually takes a wide variance from forecasts for the update to cause a noticeable move in mortgage pricing.

Medium

Unknown

Productivity and Costs (Quarterly)

We will also get revised 2nd Quarter Productivity numbers early tomorrow. Strong levels of productivity in the workplace allow the economy to expand without inflation concerns. They are expected to show a 2.4% increase in productivity, unchanged from the initial estimate, while the labor costs reading held at last month’s initial reading of up 1.6%. Good news for the bond market and mortgage rates would be a solid upward revision in productivity and lower labor costs, but this report doesn't usually cause much movement in rates.

Medium

Unknown

ISM Service Index

Tomorrow's fourth release will come from the Institute for Supply Management (ISM), who will release their non-manufacturing index (aka service index) at 10:00 AM ET. This is the sister report of yesterday's ISM manufacturing index with this version tracking business executive opinions on conditions in the service sector rather than manufacturing. Forecasts have a reading of 50.5, up from July's 50.1. A reading above 50.0 means more surveyed executives felt business improved during the month than those who said it worsened. Good news for mortgage rates would be a much weaker than predicted reading.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

Factory Orders

Fed Talk

Fed Beige Book

ADP Employment

Weekly Unemployment Claims (every Thursday)

Productivity and Costs (Quarterly)

ISM Service Index

Float / Lock Recommendation