Market Levels
U.S. equities finished the week positive despite rising treasury yields. The Dow Jones broke a four-week losing streak ending the week 1.75% higher. 9 out of 11 S&P500 sectors also ended the week higher led by basic materials and industrials.
Year to date (YTD) (a)
S&P 500 +5.37%
NASDAQ +11.68%
Dow 30 +0.74%
Sector Performance – 3 Month (b)
Information Technology +3.44%
Communication Services +2.58%
Industrials +1.29%
Materials +1.26%%
Consumer Discretionary +0.46%
Financials +0.25%
Real Estate -0.33%
Energy -3.33%
Consumer Staples -6.00%
Utilities -6.70%
Health Care -7.56%
Treasury Yield (10 years) (a)
4.05%
US National Debt (c)
$31,597,783,000,000
U.S. Dollar Index (a)
104.54
Last Week’s News
Durable Goods (d)
Fell 4.5% (largest drop since April 2020)
This drop was higher than expected as consumers are spending less on big ticket items such as expensive appliances, electronics, a house, or a car. Analysts expected the number to drop at a rate of 4.0%.
2-year Treasury Yield (e)
Increased to 4.889%
The 2-year treasury yield on Thursday was trading at levels not seen since July 2007.
Mortgage Demand (e)
Falls 6% from previous week (falls for a third straight week in a row)
This report comes as homebuyer demand has dropped to a 28 year low. Applications to refinance a home loan fell 6% for the week and 74% lower year over year.
Mortgage Rates Rise (e)
Rose to 7.1% (average rate on 30-year fixed mortgage)
On Thursday, the 30-year fixed mortgage rate jumped over 7% to 7.1%. The last time rates were over 7% was back in October. This was the highest level seen in over 20 years.
Case-Shiller Home Price Index (f)
Rose 5.7% year-over-year (down from 7.6% in the previous month) and declined 0.8% in December (marking six straight months of declines)
U.S. home prices logged a monthly decline in December for the sixth-straight month as the housing market experienced a challenging 2022. Prices are 4.4% lower than when they peaked last June. Last week we saw existing home sales report 12 consecutive months of declines.
Jobless Claims (e)
Fell to 190,000 (down 2,000 from previous period)
Estimates were for 195,000
Chinas Manufacturing PMI (e)
Rose 52.6 in February (highest reading in 11 years – April 2012 it hit 53.5)
As noted last week, a PMI index over 50 represents growth or expansion within the manufacturing sector of the economy compared with the prior month (January PMI hit 50.1).
Your Money
In conclusion, the above data points give the Federal Reserve a clearer reason to increase the benchmark interest rates at the next FOMC meeting.
According to the CME FedWatch Tool, which tracks the likelihood the Fed will change the Federal target rate at upcoming FOMC meetings, the market believes there is a 69.4% probability the Fed increases the rate to 475-500BPS and 30.6% are pricing in a 500-525BPS increase. The current effective funds rate is 4.57% which means majority of the market think the next increase will be a smaller 25BPS hike.
In relation to the home data above, higher interest rates and a possible recession make it tough for buyers. With the higher rates, ongoing inflationary pressures, and economic volatility are creating a sense of hesitation in the housing market.
Quote (g)
“When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive).”
– Warren Buffet
(a) Yahoo Finance
(c) US Debt Clock
(d) Reuters
(e) CNBC Economy
(f) SPGlobal
(g) Yahoo
