In yet another strong housing related report, foreclosure activity dropped for the 10th consecutive month.
Mortgage backed securities (FNMA 4.00 MBS) gained +20 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move slightly lower compared to the previous week.
Consumer Sentiment: The May preliminary University of Michigan's Consumer Sentiment Index blew the doors off expectations with a very robust reading of 102.4. This is the highest reading since January 2004! Also, inflation expectations picked up to 2.5% over the next 12 months.
Philly Fed: Their Business Outlook Survey for May came in a double the reading of April (16.6 vs last of 8.5) and is the best reading since January. The internal employment component was very strong, at 18.2 for a 3.5 point gain.
Leading Indicators: The composite of 10 economic components for April matched market expectations with a reading of 0.2%.
Retail Sales: The April Retail Sales report was a mixed bag with upward revisions to the prior month but a miss on the headline reading for April. The headline reading showed a contraction of -0.2% vs expectations of +0.2%. But March was revised upward from 1.6% to 1.7%. Retail Sales Ex-Automobiles gained 0.1% but the market was expecting 0.7%. March was revised upward from 1.2% to 1.3%.
Manufacturing: The May NY Empire Manufacturing Index jumped to a very high reading of 17.8 vs est of 8.5. Industrial Production for April was much weaker than expected, -0.5% vs est of 0.0%. Capacity Utilization dropped from 78.5% down to 77.9%
Trade War: China announced tariffs of $60B on U.S. Goods which breaks down to 2,493 specific items but some of these tariffs are not new. 595 items were already tariffed at the rate of 5% and will remain at that rate. 974 new items will receive a 10% tariff and 1,078 items will move up to a new tariff rate of 20%. In response, the U.S. Commerce Department added Huawei Technologies Co Ltd and 70 affiliates to its "Entity List" - a move that will make it much more difficult for the telecom giant to buy parts and components from U.S. companies. U.S. officials said the decision would also make it difficult for Huawei to sell some products because of its reliance on U.S. suppliers.
On a separate front, the U.S. has decided to delay increasing auto tariffs on the E.U and Japan for six months.
Canada and the U.S. have agreed to end all pending WTO tariff litigation with the agreement taking effect in ‘no later than two days'. The move will also lift the 25% steel and 10% aluminum tariffs the U.S. placed on the two trading neighbors almost a year ago in the name of national security.
What to Watch Out For This Week:
The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.