Mortgage Rate Indicators for Dallas

Market Comment - Week of May 31th, 2010
Mortgage bond prices fell last week pushing mortgage interest rates higher. The global economic turmoil continued with concerns about instability on the Korean peninsula. The Spanish government took over a regional bank, which added to the fray of an already battered Euro. The Chinese indicated they would not liquidate Euro bond holdings, which was a concern. Stocks continued to bounce up and down, as one hundred point swings were often the norm. Rates rose by about 1/2 of a discount point for the week.

The employment report Friday will be the most important event this week. The bond market will be closed Monday for Memorial Day. Mortgage interest rates may be volatile Tuesday as trading resumes following the extended holiday weekend. Look for continued choppy trading amid global economic instability.



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Economic Factors
Economic Indicator Release Date Time Consensus Estimate Analysis
Construction Spending Tuesday, June 1, 2010 Up 0.1% Low importance. An indication of economic strength. A significant decrease may lead to lower rates.
ISM Index Tuesday, June 1, 2010 58.9 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
ADP Employment Wednesday, June 3, 2010 Up 50k Important. An indication of employment. Weakness in payrolls may bring lower rates.
Revised Q1 Productivity Wednesday, June 3, 2010 Up 3.6% Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
Weekly Jobless Claims Thursday, June 4, 2010 455k Moderately Important. A measure of unemployment. Higher claims may bring lower rates.
Factory Orders Thursday, June 4, 2010 Up 1.1% Important. A measure of manufacturing sector strength. A larger decrease may lead to lower rates.
Employment Friday, June 5, 2010 Unemp. @ 9.8%, Payrolls +500k Very important. An increase in unemployment or weakness in payrolls may bring lower rates.


ADP Employment

The ADP employment report is a measure of employment derived from data of roughly 500,000 US businesses. The survey focuses on the private sector of the economy. In contrast, the Bureau of Labor Statistics releases the regular employment report which includes both private and government employment statistics.

The ADP employment report has gained more prominence lately in that it is delivered prior to the Friday employment report. This gives analysts an improved forecast heading into the payrolls component of the employment report later in the week.

The Fed is usually focused on keeping inflation in check. Tightening employment conditions can result in wage inflation. The ADP report provides solid data on these conditions. Despite this, the data still can diverge from the regular employment report. The employment report is derived from a household survey and an establishment survey. These surveys often differ from one another and from the ADP employment report in that they are based on different data sets. There are no guarantees that the most important employment report the first Friday of each month will mirror the ADP report released 2 days prior. With this in mind floating into the data is always very risky. Now is a great time to take advantage of mortgage interest rates at these historically low levels to avoid future market volatility.