This will be a very busy week in terms of economic data. Tuesday will be the release of December’s Producer Price Index , along with Core PPI, and Retail Sales which gives a glimpse into the state of inflation and whether it is effecting consumer buying. Wednesday’s data will include Consumer Price Index and then Thursday will be Philadelphia Fed Index, Housing starts, Building Permits, and Jobless Claims.
If that weren’t enough data, the equity market is going into earnings season when many companies report 4th quarter results. Traders will be looking for places to pick up quick profits based on earnings data and are likely to pull money out of bonds to fund these transactions, especially given the rumors that the Fed might ease rates prior to the end of the month FOMC meeting. The fact that the Fed is most likely to lower the Fed Funds rate again by the end of the month will put additional pressure on bonds which is never good for mortgage interest rates.
It seems however, that the never ending news of write-downs from companies such as Citifinancial and Merrill Lynch continue to balance these inflation indicators and keeps money in bonds.
If the upcoming economic data shows inflation concerns, mortgage interest rates are likely to deteriorate given the other factors this week.
For questions or comments please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.
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