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Market News

Market Commentary

Updated on July 3, 2022 9:16:41 PM EDT

Relevant activities will begin Tuesday morning when the Commerce Department posts May's Factory Orders data. It is similar to the Durable Goods Orders report that was released last week but covers both durable and non-durable goods. This report usually doesn't have as much of an impact on the bond market as the durable goods data does. There is no reason to believe this report will heavily influence the markets or mortgage pricing. Current expectations are showing a 0.5% rise in new orders from April's levels. A noticeably smaller increase could cause a minor improvement in pricing.

Minutes from the June 14-15th FOMC meeting are next. They will be posted at 2:00 PM ET Wednesday, making this an afternoon event for rates. There is a possibility of the markets reacting to them, but I don't believe they will reveal a significant surprise that we did not get from the post-meeting statement, revised economic projections and press conference last month. Bond traders are looking for feelings about inflation and the size and frequency of planned rate hikes to control it. If there is a reaction, it will come during mid-afternoon hours Wednesday.

June's ADP Employment report will be posted at 8:15 AM ET Thursday instead of the normal Wednesday release day. It has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. This report predicts changes in private-sector jobs, using the company's clients that use them for payroll processing as a base. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that follows a couple days later. Still, because we sometimes see a noticeable reaction to the report, it is on this week's calendar. It is expected to show approximately 195,000 private sector jobs were added during the month. Bond traders would prefer to see a much smaller increase.

The big news of the week will be the June's Employment report at 8:30 AM ET Friday. This highly important report will tell us June's unemployment rate, number of new payrolls added or lost and some earnings figures. These are considered to be extremely important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, a large decline in payrolls and no change in earnings. Weaker than expected readings would likely help boost bond prices and lower mortgage rates Friday. However, stronger numbers could be extremely detrimental to mortgage pricing. Analysts are expecting to see the unemployment rate hold at 3.6% and 260,000 jobs added to the economy last month, while earnings rose 0.3%. A higher unemployment rate, fewer new jobs and a smaller increase in earnings would be considered favorable news for rates.

Overall, Friday is best candidate for most important day for rates, but Wednesday afternoon may also be noticeably active if the FOMC minutes show some surprises. No day stands out as likely to be calm. Even though Tuesday has the least important report of the week, the markets often are active following a long holiday weekend. While we likely will not see the movement in rates we saw last week, there a couple days that could bring some volatility. Therefore, it would be prudent to keep an eye on the markets if still floating an interest rate and closing in the near future.

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