Mortgage Rates Feed on Data, August 31, 2010

Mortgage Rate Trend Direction:     Down

Economic Reports/Rate Impact:    Chicago PMI, 10:00 AM ET, Moderate Rate Impact

                                                              Consumer Confidence, 10:00 AM ET, Moderate Rate Impact

                                                              FOMC Minutes, 2:00 PM ET, Moderate Rate Impact

Key News:                                          Weakness in Japanes Economy

Summary

The end of August is typically one of the least active times in the market.  Today may hold true to that trend despite several reports that will provide a good view into the US economy.  Stock markets worldwide have been weak today.  Early activity in the mortgage-backed securities market has been sharply higher.  Consequently, mortgage rates are expected to be lower this morning relative to their closing position yesterday.

Impact of economic reports

At 10:00 AM ET two reports will help guide early market activity.  The Chicago Purchase Managers Index will give us a look at manufacturing activity in the midwest.  Expectations are for a modest reduction in activity.  Also, the consumer confidence report is expected to show a slight decline in opinions of American consumers regarding their economic prospects.

At 2:00 PM ET, the minutes from the recent Federal Open Market Committee meeting will be released.  Traders will be looking for insights into the degree of debate within the committee regarding the status of the economy and suggested Fed action.

Impact of international or political events

The japanese economy is slowing quickly.  Yesterday the Bank of Japan took emergency steps to attempt to calm the markets.  The efforts were largely unsuccessful, as the Japanes stock market declined to its lowest point in three months.  Weakness in Japan could further erode economic growth in the US.