Markets are welcoming the return of cold, hard data this week.Most of last week was spent making sense of Fed speakers, recessionary fears, and a takeover of the nation's largest lender.
This week, we'll find out if the recent fears of recession are on target, or overblown.
The data deluge starts Tuesday with the Retail Sales report.
Markets are predicting the worst Holiday Shopping numbers since 2002 and those low expectations have already been priced into mortgage bonds. Therefore, only a completely terrible number will cause mortgage rates to move lower.
Also on Tuesday, markets get hit with the Producer Price Index. This is like a "Cost of Living" measurement, but for business. If businesses are paying more to operate, it's likely that those costs get passed to consumers.
Last month, PPI was the highest on record since 1973 because of high energy costs. If it comes in high again, mortgage rates should rise on the expectation that consumers will eventually bear the burden of higher costs.
Wednesday, the consumer Cost of Living index gets released in addition to the Beige Book. The Beige Book is the Federal Reserve's local market reports that point to overall strength or weakness in different regions.
Then, on Thursday, markets will be watching the number of first-time filers for Unemployment Claims. After Unemployment Rates jumped last month, it's expected that jobless numbers will be higher than "normal", suggesting that employers are still trimming their workforces.
This is recessionary and should help to hold mortgage rates down.
Lastly, on Friday, it's the University of Michigan Consumer Sentiment report. Mostly used as a "confidence" gauge, strong readings are thought to push the economy forward because a confident consumer is likely to spend more.
Statistically, though, that correlation is not clear. But, mortgage bonds are sensitive to the report and that's why we watch it.
It's a busy week of data and expect markets to get a firmer sense of where the economy is headed. Weakness is expected and mortgage rates are already pricing it in.
Therefore, be wary of better-than-expected results this week because mortgage bonds could correct quite quickly.
