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Updated on February 4, 2025 10:13:31 AM EST

Today’s sole relevant economic release was December’s Factory Orders report at 10:00 AM ET. It revealed a larger than expected 0.9% decline in new orders at U.S. factories. Forecasts predicted a 0.6% decline, hinting that manufacturing activity is weaker than expected. This contradicts yesterday’s strong ISM index, but that report covered January where today’s data goes back to December. As a sign of weakness, we are labeling the report good news for bonds and mortgage pricing.

In yesterday’s report we cautioned that the tariff-related rally was likely a short-term gain for bonds and we would probably see it reversed later in the week. Unfortunately, it took less than one trading session to erase most of the morning gains. The selling began late morning and continued the rest of the day to close nearly unchanged from Friday’s close. Headlines that President Trump delayed the tariffs on goods from Canada and Mexico definitely contributed to the reversal. That said, regardless of a knee-jerk reaction to related news, we can expect tariffs to cause mortgage rates to move higher over the long-term.

Tomorrow has two pieces of economic data that we will be watching. First up is Januarys ADP Employment report at 8:15 AM ET that tracks changes in private-sector jobs. While it does draw attention, it is a non-governmental report that some consider to be overrated and not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that we will get Friday. Still, because we often see a reaction to its results, it is included in this weeks calendar. Analysts are expecting to see 150,000 new private jobs were added to the economy last month. A much smaller number would be favorable to mortgage rates.

The Institute for Supply Management (ISM) will release their non-manufacturing index (aka service index) at 10:00 AM ET tomorrow. This is the sister report of yesterday’s manufacturing index with this version tracking business executive opinions on conditions in the service sector rather than manufacturing. It is expected to show a reading of 54.4 for January, up a little from December’s 54.1. A reading above 50.0 means more surveyed executives felt business improved during the month than those who said it worsened. Good news for rates would be a much lower reading than expected.