Forecast for the Week: Inflation data could be a market mover in the holiday-shortened trading week

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The Fed and investors will be watching closely Thursday to see if there are any hints that inflation is on the rise. The Bond markets will close early on Thursday at 2:00 p.m. ET while Stocks are open normal hours. U.S. financial markets will be closed for Good Friday on March 30.

• Economic data kicks off on Tuesday with the release of Consumer Confidence.
• The final reading on Q4 2017 Gross Domestic Product will be delivered on Wednesday along with Pending Home Sales.
• Thursday brings news on inflation with Personal Consumption Expenditures. Plus, Personal Income, Personal Spending and weekly Initial Jobless Claims will also be released.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve. In contrast, 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. When Bond prices 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 are 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, Mortgage Bonds continue to trade in a sideways pattern. Home loan rates remain attractive.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Mar 23, 2018)

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