Both the stock and bond markets are weak in early morning trading, as investors digest this morning’s economic news and decide what it means to the mortgage bond market. It is an interesting time where bad economic news can be both good and bad for the U.S. stock market. Clearly, good data shows strength in the economy, which is good for stock prices overall. However, during times where there is hope that the Federal Reserve may lower short term interest rates, stock investors will celebrate the steps closer to a Fed rate cut. In such case, weak economic data can also influence the stock market to climb higher.
Retail Sales increased .5% in the month of May, missing the markets’ expectation of .7%. However, this is truly a strong number that if it were to continue for an entire year would lead to a 6% rate of annualized growth. This number does fluctuate with the seasons, and the summer months tend to show a strong reading.
Mortgage bonds remain trapped in the middle of a trading range. I don’t anticipate a breakout of this channel in either direction today. There remains small mortgage pricing risk for those who choose to float. So, most should consider locking.