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While it was a light week for economic data, the most significant report once again contained much stronger than expected results. Investors were more focused on the concerning spread of the coronavirus, however, and mortgage rates dropped slightly to record low levels.
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Like the vast majority of recent economic reports, the most significant data released this week again showed clear signs of a faster than expected recovery after the partial shutdown of the economy due to the pandemic. The ISM national services index jumped from 45.4 in May to 57.1 in June, which was far above the consensus forecast. Readings above 50 indicate an expansion in the sector. Since services account for more than two-thirds of US economic activity, this report is closely watched by investors.
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Although the economic data for the last couple of months has shown unexpectedly swift improvement, the question is whether this trend will continue. Investors have been growing more concerned that rising levels of coronavirus cases in many states may lead to delays in the reopening of the economy. Since slower economic activity reduces the outlook for future inflation, this has been positive for mortgage rates.
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In fact, both Freddie Mac and the Mortgage Bankers Association reported that average rates for 30-year fixed-rate mortgages reached record low levels this week. Even more encouraging, the MBA revealed that applications to purchase a home were a solid 33% higher than a year ago at this time, and refinance applications were a stunning 111% higher.
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Looking ahead, the primary focus will continue to be news about medical advances, plans for reopening the economy, government stimulus programs, and Fed monetary actions. Beyond that, the Consumer Price Index (CPI) will come out on Tuesday. CPI is a widely followed monthly inflation report that looks at the price change for goods and services. Retail Sales will be released on Thursday. Since consumer spending accounts for about 70% of all economic activity in the US, the retail sales data is a key indicator of the strength of the economy. Housing Starts will come out on Friday. In addition, the next European Central Bank meeting will take place on Thursday.
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| Weekly Change |
| 10yr Treasury |
fell |
0.05 |
| Dow |
rose |
100 |
| NASDAQ |
rose |
300 |
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| Calendar |
| Tue |
7/14 |
CPI |
| Thu |
7/16 |
Retail Sales |
| Fri |
7/17 |
Housing Starts |
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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