Market Forecast: FOMC Meeting, JOLTS, and Retail Sales

Blog posted On December 11, 2017

Last week, the Senate passed their version of the Republican tax reform bill.  The House and Senate will now go to a conference committee to discuss the differences between the bills and edit one version to send to President Trump.  The Federal Open Market Committee (FOMC) will meet on Tuesday and Wednesday, and Fed Chair Janet Yellen will hold a press conference on Wednesday afternoon.  On Monday, the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) comes out and on Thursday the retail sales report will be released.

The FOMC meets Tuesday and Wednesday and is largely expected to raise rates.  The unemployment rate is at a record low and inflation is close to the targeted rate.  In December 2016, Fed Chair Janet Yellen projected three rate hikes in 2017, and so far, the Fed has raised rates twice. 

The JOLTS report is used to track monthly changes in job openings, offers, hiring, and voluntary quits.  Though the data lags one month, it is still a strong indicator of the labor market.  In September, JOLTS showed the addition of 6.094 million jobs.  In a strong labor market, employees are confident in changing jobs, because they believe if they quit they will find comparable employment.

Retail sales track the total amount of good and related services sold at retail stores.  In October, total retail sales improved 0.2% month-over-month, 0.1% month-over-month less autos, and 0.3% month-over-month less autos and gas.  Consumer spending is used to determine the health of the economy, since it accounts for about two-thirds of Gross Domestic Product.

If the FOMC votes to raise the benchmark interest rate, mortgage rates are likely to react.  However, this will be gradual.  Even with this year’s two rate hikes, mortgage rates remain historically low.

Sources: Bloomberg, CNBC, MarketWatch, Mortgage News Daily