Forecast for the Week

The markets are closed Monday for the Presidents Day holiday. The rest of the week will be busy, with key housing, inflation, and manufacturing news.

• Manufacturing data from the Empire State Index on Tuesday and the Philadelphia Fed Index on Thursday will give investors a look at two of the major regions in the nation.
• Housing dominates the week with the National Association of Home Builders Housing Market Index on Tuesday, Housing Starts and Building Permits on Wednesday, and Existing Home Sales on Friday.
• We’ll get a read on inflation with the wholesale-measuring Producer Price Index on Wednesday, followed by the Consumer Price Index on Thursday.
• Also on Thursday, Weekly Initial Jobless Claims will be reported as usual.

In addition, the minutes from the January 28-29 Federal Open Market Committee meeting will be released on Wednesday, and this could provide some volatility this week. Investors will be looking for additional information about tapering when the minutes are released. Will the minutes hint toward ending the Fed’s Bond purchase program sooner rather than later?

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.

When you see these Bond prices moving higher, it means home loan rates are improving — and when they are moving lower, home loan rates are getting worse.

To go one step further — a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, it was a volatile week for Bonds, but home loan rates are still attractive. I’ll be watching the markets closely for all the latest developments.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday February 14, 2014)

The Mortgage Market Guide View…

Date	ET	Economic Report	For	Estimate	Actual	Prior	Impact
Tue. February 18	08:30	Empire State Index	Feb	7.5		12.5	HIGH
Tue. February 18	10:00	Housing Market Index	Feb	56		56	Moderate
Wed. February 19	08:00	Core Producer Price Index (PPI)	Jan	0.1%		0.3%	Low
Wed. February 19	08:30	Housing Starts	Jan	964K		999K	Moderate
Wed. February 19	08:30	Building Permits	Jan	980K		986K	Moderate
Wed. February 19	08:30	Producer Price Index (PPI)	Jan	0.2%		0.4%	Moderate
Wed. February 19	03:00	FOMC Minutes					Low
Thu. February 20	08:30	Jobless Claims (Initial)	2/15	335K		339K	Moderate
Thu. February 20	08:30	Consumer Price Index (CPI)	Jan	0.1%		0.3%	HIGH
Thu. February 20	08:30	Core Consumer Price Index (CPI)	Jan	0.1%		0.1%	HIGH
Thu. February 20	10:00	Philadelphia Fed Index	Feb	7.4		9.4	HIGH
Fri. February 21	10:00	Existing Home Sales	Jan	4.75M		4.87M	Moderate

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