5350 DTC Pkwy., Ste. 305, Greenwood Village, CO 80111
phone: 303-320-9767 | fax: 303-320-9766

5350 DTC Pkwy., Ste. 305, Greenwood Village, CO 80111
phone: 303-320-9767 | fax: 303-320-9766

Sunday, August 18, 2019

Market Commentary

Updated on August 16, 2019 10:20:33 AM EDT

Julys Housing Starts report was posted at 8:30 AM ET this morning, revealing a 4.0% drop in new home groundbreakings. This was weaker than expected, hinting at a softer housing sector. However, the decline is being attributed to lower multi-family housing starts. New groundbreakings for single family homes actually rose last month and a secondary reading that tracks new permits issued for future starts was stronger than forecasts. That makes the data neutral to slightly negative for bonds and mortgage rates.

We did get some good news from this morning’s second release. The University of Michigan’s preliminary Index of Consumer Sentiment for August came in at 92.1, well below July’s 98.4 and forecasts of 97.7. The lower reading indicates surveyed consumers did not feel as strong about their own financial situations as many had thought. Because waning confidence in their finances usually means consumers will delay making a large purchase in the near future, we can consider this good news for rates. That is because consumer spending makes up almost 70% of our economy and bonds tend to thrive during weaker economic conditions. Unfortunately, this report is not important enough to offset the negative momentum in bonds this morning.

Next week lacks any key economic data with just a couple of housing reports and one other release scheduled. But we do get the minutes from last month’s FOMC meeting where the Fed cut key rates for the first time since December 2008. They have the potential to create volatility in the markets or be a non-factor. The same can be said for a speaking engagement by Fed Chairman Powell next Friday morning. The week starts off with nothing of relevance scheduled, leaving weekend news and stock movement to drive bond trading and mortgage rates. Look for details on all of next week’s activities in Sunday evening’s weekly preview.

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