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Markets Shrug off Impeachment Talks

 
An impeachment inquiry of President Trump caught investors by surprise this week, but it had little lasting effect on mortgage rates. The economic data also had just a minor impact, and mortgage rates ended the week nearly unchanged. 
 
House Democrats announced an impeachment inquiry of President Trump on Tuesday. The immediate reaction by investors to the resulting uncertainty was a small shift from riskier assets such as stocks to relatively safer assets such as bonds, which was positive for mortgage rates. Later in the week, however, most investors decided that the news was unlikely to change the economic outlook significantly, and they reversed their initial asset allocation changes.  
 

While the latest inflation data matched expectations and had little impact, investors will be watching future results closely to see if inflation continues to trend higher. In August, the Core PCE index, which excludes the volatile food and energy components, was 1.8% higher than a year ago, up from an annual rate of increase of 1.7% last month. This remained below the Fed's stated target level of 2.0%, but it also was the highest level in six months.

 
Sales of new homes account for just 10% of the market, compared to 90% for previously owned homes. This data still is highly valued by investors each month, though, since it reflects more timely activity than the sales data on previously owned homes. This is because it measures contracts signed, while the other is based on actual closings. The report released this week revealed that sales of new homes in August surged 7% from July to the second highest level since 2007 and were 18% higher than a year ago. Sales have been boosted by lower mortgage rates in recent months. 
 
 
Looking ahead, the monthly Employment report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the ISM national manufacturing index will be released on Tuesday and the ISM national services index on Thursday. In addition, news about the impeachment inquiry or the trade negotiations could influence mortgage rates. 
 

Weekly Change
10yr Treasury fell 0.01
Dow fell 25
NASDAQ fell 100

Calendar
Tue 10/1 ISM Manufacturing
Thu 10/3 ISM Services
Fri 10/4 Employment

 
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