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Market Commentary

Updated on May 16, 2022 10:04:28 AM EDT

There is nothing of importance scheduled for today other than an early morning Fed speaking engagement that was uneventful. The rest of the week brings us the release of five relevant monthly economic reports, one of which is considered to be highly important. There is also a Treasury auction and slew of Fed speeches that may come into play.

Activities start tomorrow morning with two economic reports, one being the highly important Retail Sales report for April. This is an extremely relevant report because it measures consumer spending, which makes up over two-thirds of the U.S. economy. Analysts are expecting a 0.9% increase in sales from March to April. A smaller increase should push bond prices higher and mortgage rates lower tomorrow morning as it would be a sign the economy is not as strong as thought. Bad news for rates would be a larger increase in sales.

Tomorrow's second piece of data will be April's Industrial Production report at 9:15 AM ET. It shows manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Forecasts are predicting a 0.5% rise in production, indicating that manufacturing activity is strengthening moderately. This report draws some attention but not nearly the same level that the sales data does, meaning the sales report will have a much bigger impact on rates than this one will.

We also have plenty of Fed talk to listen to this week, including from Fed Chairman Powell tomorrow afternoon. He will be speaking at a Wall Street Journal conference and is expected to speak at 2:00 PM ET. The hot topics traders are looking for are thoughts on inflation and the size of the Fed's future increases to key short-term interest rates to help control it.

The most important day for rates is tomorrow due to the significance of the Retail Sales report and Chairman Powell speaking publicly. The calmest day may be Friday unless something unexpected happens. It is still corporate earnings season with some big-named retail companies reporting this week. Disappointing results, indicating consumers are spending less, should hurt stocks, boost bonds and lead to lower mortgage rates. There is no reason to believe that this will be a quiet week for rates. Therefore, please keep an eye on the markets if floating an interest rate and closing in the near future.

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