Stock traders were on edge for most of the week, with concerns about banking, rising interest rates, inflation, and volatile stock and bond markets. Treasury yields dipped to their lowest levels since September. Indicative of the bumpy week of trading, the Russell 2000 gained, then fell to its lowest level since October, then bounced back to end the week higher. By the end of last week, the Nasdaq and the S&P 500 advanced the furthest among the major benchmark stock indexes. Ten-year Treasury yields ended about where they began. The dollar advanced later in the week, but not enough to keep from closing lower. Crude oil prices remained below $70.00 per barrel, despite closing the week up more than 4.0%. Gold prices slipped minimally.
Last Week’s Economic News
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The Federal Open Market Committee increased the target range for the federal funds rate 25.0 basis points to 4.75%-5.00%, the highest range since 2007. The Committee noted that job gains picked up, while inflation remained elevated, and it left little question that it is committed to bringing inflation down to 2.0%. The FOMC specifically referenced the U.S. banking system, indicating that it is “sound and resilient,” despite recent bank closures. However, the Committee predicted that “recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation.” While anticipating additional policy firming to return inflation to 2.0% over time, the Committee indicated that it would continue to monitor labor market conditions, inflation pressures and inflation expectations, and financial and international developments, and “would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”
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Sales of existing homes increased in February for the first time in the last 12 months. Existing-home sales rose 14.5% last month, the largest monthly percentage increase since July 2020. Despite the February increase, existing-home sales remained 22.6% below their year-earlier sum. Total housing inventory sat at a 2.6-month supply in February, down from January (2.9%) but up from 1.7 months in February 2022. The median existing-home price was $363,000 in February, up slightly from $361,200 in January but down from the February 2022 median price of $363,700. Sales of existing single-family homes jumped up 15.3% in February from the previous month but were 21.4% under the February 2022 price. Inventory of single-family homes was 2.5 months in February, down from 2.9 months in January and under the February 2022 pace of 2.7 months. The median price for existing single-family homes was $367,500 in February, up from the January price of $365,400 but lower than the February 2022 price of $370,000.
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According to the Census Bureau, sales of new single-family homes in February increased 1.1% above the January rate. Despite the increase last month, new home sales were 19.0% below the February 2022 estimate. Available inventory sat at an 8.2-month supply based on the current sales pace, 0.1 percentage point below the January pace. The median sales price was $438,200 ($426,500 in January), while the average sales price was $498,700 ($479,800 in January).
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New orders for manufactured durable goods, down three of the last four months, decreased 1.0% in February, according to the Census Bureau. This followed a 5.0% January decrease. Excluding transportation, new orders were virtually unchanged. Excluding defense, new orders decreased 0.5%. Transportation equipment, also down three of the last four months, drove the decrease after falling 2.8%. Shipments, down two consecutive months, fell 0.6% in February. Inventories increased 0.2% in February, increasing for the 24th out of the last 25 months.
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The national average retail price for regular gasoline was $3.422 per gallon on March 20, $0.034 per gallon less than the prior week’s price, and $0.817 less than a year ago. Residential heating oil prices averaged $4.131 per gallon on March 20, $0.053 below the previous week’s price, and $0.755 per gallon less than a year ago.
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For the week ended March 18, there were 191,000 new claims for unemployment insurance, a decrease of 1,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended March 11 was 1.2%, unchanged from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended March 11 was 1,694,000, an increase of 14,000 from the previous week’s level, which was revised down by 4,000.
Eye on the Week Ahead
The third and final estimate of fourth-quarter gross domestic product is available this week. The second of three estimates, released last month, showed the economy accelerated at a rate of 2.7%. The February data on personal income and outlays is also out this week. January saw personal income increase 0.6%, consumer spending advance 1.8%, and consumer prices rise 0.6%.
Have a nice week!
Sincerely,
Robert G. Carpenter