March's New Home Sales report started today's scheduled activities at 10:00 AM ET. It showed sales of newly constructed homes exceeded expectations, signaling strength in a small portion of the housing sector. The 7.4% increase in sales was stronger than analysts had predicted. This makes the report bad news for bonds and mortgage rates, but fortunately other headlines are much more relevant than this piece of data, allowing traders to overlook it.
What is driving this morning's rally in stocks and bonds are comments from President Trump. He stated that he is not interested in firing Fed Chairman Powell anytime soon and also indicated that the tariff war with China may be backtracked a little, so they won't be nearly as high in the future as they currently are. Both statements gave a sigh of relief to the markets that feared the negative impacts that removing Chairman Powell and high tariffs would have on the economy. It was believed that if the president could indeed remove the Fed Chair, and did so, the global markets would respond with a massive sell-off. And any reduction in tariffs is looked at as a smaller hurdle for the economy to grow. Both are fueling this morning's bond and stock markets.
We also have the 5-year Treasury Note auction and Fed Beige Book to deal with later today. Results of the auction will be announced at 1:00 PM ET. Good news for rates would be results that indicate a strong demand from investors. If interest in the securities was indeed strong, we may see bonds improve during early afternoon trading, possibly leading to a slight downward revision in rates.
The second afternoon event is the 2:00 PM ET release of the Federal Reserve's Beige Book report that gives feedback from the Fed's business contacts in each respective region. It is named simply after the color of its cover but is relied upon heavily during the FOMC meetings to make monetary policy decisions. Therefore, any major changes from the last update could cause a reaction in the financial and mortgage markets this afternoon. Of particular interest is information about prices (inflation), spending and how tariffs are affecting activity.
Tomorrow has three pieces of economic data that may have an impact on mortgage pricing. March's Durable Goods Orders will be released at 8:30 AM ET that gives us an indication of manufacturing sector strength. This report tracks orders for big-ticket items at U.S. factories. These are products that are expected to last three or more years, such as appliances, electronics and airplanes. Current forecasts show a 1.5% increase in new orders, signaling growth in the manufacturing sector. Weaker manufacturing activity is favorable news for mortgage rates. It is worth noting that this data is known to be volatile from month to month, so a small variance from expectations won't affect the markets like it would coming in many other reports.
Also early tomorrow morning will be the release of last week's unemployment figures. They are expected to show 220,000 new claims for jobless benefits were filed, up from the previous week's 215,000. Rising claims are a sign of weakness in the employment sector that makes bonds more attractive to investors. Accordingly, good news for rates would be a larger than predicted number.
March's Existing Homes Sales numbers from the National Association of Realtors will be announced at 10:00 AM ET tomorrow. This data gives us another indication of housing sector strength and mortgage credit demand and can influence mortgage pricing if it shows a sizable variance from forecasts. Ideally, the bond market would like to see a large decline in home resales because a softening housing sector makes broader economic growth more difficult. Analysts are expecting to see a decrease in sales between February and March. The larger the decline, the better the news it is for bonds and mortgage rates.
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