Market Commentary

Updated on May 15, 2024 10:08:56 AM EDT

The first of this morning’s two highly influential economic reports was April’s Consumer Price Index (CPI) that failed to show any big surprises in inflation at the consumer level of the economy. The overall and core readings pretty much matched forecasts, as did the annual numbers. April’s overall and core CPI readings both rose 0.3%, while annuals came in up 3.4% and 3.6% respectively. It appears that bond traders are breathing a sigh of relief this morning after yesterday’s report pointed toward stronger than expected inflation at the producer level of the economy.

Also posted early this morning was April’s Retail Sales report. It revealed consumers spent much less last month than was predicted. The headline number showed retail-level sales were unchanged from March, falling short of the 0.4% increase that was expected. A secondary reading that excludes more volatile and costly auto transactions rose 0.2%, as it was expected to do. It may be this data that is fueling this morning’s bond rally and improvement in rates. Consumer spending makes up over two-thirds of the U.S. economy, indicating slower economic growth may be in the near future. Bonds tend to thrive in weaker economic conditions, driving mortgage rates lower.

The rest of the week’s economic data is not nearly significant as what was released yesterday and this morning. There are two moderately important reports coming at 8:30 AM ET tomorrow and another at 9:15 AM ET. First up will be last week’s unemployment figures. They are expected to show 220,000 new claims for unemployment benefits were made, down from the previous week’s 231,000 initial filings. Declining claims are a sign of strength in the employment sector, so good news for mortgage rates would be a larger number.

Aprils Housing Starts will give us an indication of housing sector strength and mortgage credit demand by tracking newly issued permits and actual new home groundbreakings. It is expected to show a rise in new construction starts, hinting at strength in the new home portion of the housing sector. This report is not known to be a big mover of mortgage rates, meaning it likely will have a minimal impact on tomorrow’s rates regardless of what it reveals.

The later report is Aprils Industrial Production data. It shows manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Forecasts show a 0.2% increase in production, indicating that manufacturing activity strengthened slightly last month. This report draws some attention but not nearly the same level that today’s data does.