Market Commentary

Updated on December 20, 2024 10:09:23 AM EST

This morning’s important economic data came in Novembers Personal Income and Outlays report at 8:30 AM ET that gave us a sign inflation slowed some last month. This report has a good number of readings that bond traders are interested in, including the Fed’s preferred inflation gauges, and they all can be labeled favorable for rates. Most importantly, the overall and core PCE readings both fell short of forecasts, rising only 0.1% last month when they were expected to be up 0.2%. They both also came in lighter than expected on a year-over-year basis, up 2.8% and 2.4% respectively.

The other headline numbers in the report weren’t nearly as influential as the inflation readings but still are relevant. Income was 0.3% and spending rose 0.4%. Both were 0.1% short of forecasts to indicate consumers had less money to spend than thought and spent less than predicted. Rising income fuels the ability for consumers to spend more and that category makes up over two-thirds of the U.S. economy. Therefore, softer than expected numbers are good news for bonds and mortgage rates.

Today’s second report was December’s revised Index of Consumer Sentiment from the University of Michigan. They announced a reading of 74.0 that was unchanged from the initial estimate two weeks ago. Rising confidence in their own financial situations means consumers feel better about their own financial situations and are likely to spend more. Since there was no surprise in the update, there was no reaction to the data. Accordingly, we are considering the report to be neutral for mortgage rates.

Next week has a few relevant economic reports scheduled around the Christmas holiday, none of which are considered to be key releases. They begin late Monday morning with December’s Consumer Confidence Index that will give us the same type of info that this morning’s second release did. It will come from the Conference Board, who is not a governmental agency.

The markets will close early Tuesday and reopen Thursday, albeit likely with a skeleton crew and light or thin trading after the holiday. Furthermore, the looming government shutdown set for midnight tonight could start affecting some of the data releases as early as next week if it is not averted this weekend. Look for details on all of next week’s activities in Sunday evening’s weekly preview.