Market Matters

This was a light data week so the majority of the price action we saw in the markets was due to Fed speak, which after the Fed members spoke this week, it appears that the May meeting is most likely a 50 bps rate hike, or at least that is what the market is pricing in. There have been a few calls for 50 bps rate hikes in May and June meetings, followed by a 25 bps rate hike for the remaining meetings for the year. This has caused some volatility in mortgage rates and in the 10-year treasury. Next week is data heavy, including the Nonfarm payrolls report, which is the biggest data point of the month typically. Best to stay defensive here.

 

Initial Jobless Claims

Initial Jobless Claims fell -28k from 215k to 187k in the week ended March 19th, beating expectations for a 210k print, and marking the lowest level since September 1969. Continuing claims also fell more than anticipated, down -67k from 1.417mln to 1.35mln in the week ended March 12th. That was the lowest reading since the first week of 1970.

 

Durable Goods Orders

Durable Goods Orders declined by -2.2% in the preliminary report for February, posting the weakest month for activity since April 2020. The pullback follows three strong months for durables orders and was weighed down by a sharp decline in the transportation categories. Excluding orders for private aircrafts and another soft month for auto activity, other durable orders fell by a less disappointing -.6%, still reflecting moderation across most sectors. Focusing in on the categories that track business investment in equipment, core capital goods orders declined -.3%, a disappointment relative to the expected .5% gain that was only partially offset by a positive revision to January.

 

New Home Sales

New Home Sales for February declined by -2.0% to 772k annualized units vs. the prior downwardly revised print of 788k in January (orig. 801k). Looking YoY, new home sales in February are down by -6.2% from the 823k unit pace seen in 2022. New homes on the market at the end of February were 407k, up modestly from a prior 398k, and the most since August 2008. Combined with the decline in sales, this brought the month's supply up from 6.1 to 6.3, its highest since last October. The median price for a new home sold in February fell -6.3% to $400.6k, but that is still up by 10.7% when looking YoY. The average price, however, was higher by 3.4% to $511k, which is a large gain of 25.4% YoY. Broken out by region, the West fell by -13.0% on the month, the South was down -1.7%, the Midwest up 6.3%, and the Northeast up 59.3%.

 

Philly Fed Index

The Philly Fed's Nonmanufacturing Business Outlook Survey improved in March, with the index up 10.6 points to 38.1, and its region-level activity index up 16.5 points to 32.4. Demand numbers were positive with the new orders index up from 16.3 to 31.0, its highest reading since June 2018. Despite a recovery on the demand side, input prices fell -3.1 points to 65.7. While this was the second highest on record, businesses seemed less able to pass prices on, as the prices received index fell -7.6 points to 43.8, which was a three-month low. In labor market results, employment jumped 12.5 to 23.3, its best since last July, while the wages and benefits index rose 5.2 to 55.7, which was a three-month high. Finally, while future optimism numbers increased, they were weaker overall vs. the current conditions data.