Retail Sales Below Expectations

With Fed policy tightly linked to incoming data, the economic reports were the main influence this week. The major reports were weaker than expected, which was disappointing news for the economy, but good news for mortgage rates. As a result, mortgage rates ended the week a little lower.

With so much uncertainty about the timing of the first federal funds rate hike, comments from Fed officials are having a significant impact on mortgage rates. Thursday was a prime example. Fed Vice Chair Fischer's speech caused mortgage rates to climb early in the session. After three more Fed officials were finished speaking later in the day, however, mortgage rates had recovered their losses. This volatility is likely to continue in the weeks and months ahead.

The housing data released this week was mixed. Fortunately the more current data was encouraging, while the older data, impacted by bad weather, was disappointing. The National Association of Home Builders (NAHB) confidence index for April rose nicely from March, indicating home builders see the market continuing to improve. The Commerce Department's report on housing starts and building permits in March fell far short of expectations.

Next week will be a very light one for economic reports. Existing Home Sales will be released on Wednesday, and New Home Sales will come out on Thursday. Durable Orders, an important indicator of economic activity, will be released on Friday. Investors also will be watching for signs of progress between Greek and eurozone officials on reform measures for Greece. Experts are divided about whether Greece will reach an agreement or will ultimately exit the European Union.

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