With nothing in the way of new macro-economic data to guide them, mortgage investors much decide whether to lock in some profits before the trading day comes to an end – or stick with the rally in hopes that it produces more upside gains before the early close for the Christmas Holiday next Thursday.  Look for trading action to become increasingly spasmodic as traders focus on making sure profits are safely registered “on-the-books” and as they put the final touches on their year-end positions.  The likelihood that anyone will be aggressively adding large risk positions to their portfolio is small – limiting the potential for a notable move to yet lower mortgage interest rates before the New Year begins.

     The few mortgage investors still at their desks next Tuesday will get a look at the final estimate of economic growth for the third-quarter.  The majority of economists expect Q3 Gross Domestic Product will register a reading of 2.8% -- exactly matching the previous guesstimate.  Tuesday also brings expectations for an improved pace of November existing home sales.   The day starts off on Wednesday with the November Personal Income and Spending report.  Contained within this data series is the Personal Consumption Expenditure Index, one of the Fed’s favorite measure of inflation pressure at the consumer level.  While both income and spending are expected to have edged a bit higher last month -- the pace of consumer inflation is expected to have posted a very modest, and mortgage market neutral gain of 0.1%.  Wednesday’s 10:00 a.m. release of the November New Home Sales and Thursday’s initial weekly jobless claims and November durable goods orders numbers will likely draw as much investor attention/interest as a single snowflake in a blizzard.  The mortgage market will close early at 2:00 p.m. ET on Thursday and will remain closed on Friday for the celebration of Christmas.
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Following a stronger-than-expected weekly jobless claims number - mortgage investors were quick to push mortgage interest rates fractionally higher in the day's early going. 

According to the Labor Department, new applications for jobless benefits unexpectedly fell by 5,000 last week to the lowest level in more than 14 months.  While this jobless claims report falls outside of the survey period for tomorrow's 8:30 a.m. ET release of the far more important November nonfarm payroll figures -- some investors wasted no time placing their "bets" for a surprisingly mortgage market unfriendly employment story. 

I personally think these mortgage investors may have jumped the gun a bit.  Even though the first-time claims number was better than the majority of economist had anticipated - the number of people continuing to collect benefits after the initial week rose by 28,000.   Going one step further, with hiring so slow, the unemployed are exhausting their regular benefits (26 weeks in most states) and instead are claiming extended benefits or Emergency Unemployment Compensation.  Growing totals for these programs have more than offset the decline in the regular weekly jobless claims number.  For the week ending November 14th, the enrollment in the extended benefits programs offered by the government grew by 323,000.   From this perspective, the weekly jobless claims numbers are almost certainly glossing over the underlying anemic conditions in the labor market.

     The probabilities remain high that Friday's November nonfarm payroll will fall within shouting distance of the consensus estimate for a national job loss number of 130,000.  If so, the Labor Department's data will likely exert little, if any influence on the mortgage market.   On the other hand, if the headline number shows the economy lost 150,000 jobs or more and/or the national jobless rate exceeds 10.3% -- the odds are high that a large number of investors will be caught leaning the wrong way - resulting in higher prices and lower mortgage interest rates before the day is over.

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