Market Update

February personal income rose +0.3%, while spending rose +0.8%, leading the personal savings rate to drop to 3.6%. New home prices dropped by -3.5% from January, nearing bear market territory from the peak of new home prices in 2021. Durable goods orders increased modestly by +1.4%, but downward revisions in January underscored challenges in the manufacturing sector. Consumer confidence remained stable in March. Upward revisions in real GDP and consumer sentiment data provided positive surprises, indicating a resilient US economy.

Last week, market sentiment remained bullish as the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all reached record highs following the Federal Reserve meeting on Wednesday. The March Fed meeting and updated Summary of Economic Projections brought minimal surprises, prompting a rally in stocks on Wednesday afternoon following the press conference. Existing home sales also saw a notable surge in February, while the highly anticipated Reddit IPO debuted on Thursday last week, raising approximately $750 million from the offering.

February’s Consumer Price Index slightly exceeded expectations, with headline CPI at 3.2% and core CPI at 3.8%. Behind the increase, energy and shelter costs primarily drove the rise in prices. Additionally, the Producer Price Index showed goods inflation surpassing service inflation, marking a shift from previous trends. February’s retail sales fell short of expectations, although did show a modest overall increase and strong growth in online shopping and food services. Consumer sentiment slightly declined in March, with respondents largely pointing to feelings of economic uncertainty with the upcoming presidential election.

Last week, equities slipped amidst mixed signals from the US job market. February’s nonfarm payroll report exceeded expectations with the addition of +275,000 jobs, yet the unemployment rate unexpectedly rose to 3.9%. The ISM Manufacturing Index indicated the 16th consecutive month of contraction in the sector, while the ISM Services Index showed continued resilience. Consumer credit rose in January, particularly revolving credit, raising concerns about increased debt reliance.

Equities continued to rally last week, fueled by January’s PCE inflation data showing headline inflation at 2.4% YoY, propelling major indexes to new all-time highs, with both the S&P 500 and the Nasdaq Composite reaching record levels. Additionally, personal income rose while spending declined, leading to a slight increase in the savings rate. Durable goods orders fell by -6.1%, mainly due to a drop in transportation. February’s Consumer Confidence Index unexpectedly dropped by -3.8%. Meanwhile, Bitcoin rallied to over $60,000, driven by anticipation of the upcoming halving event in April 2024.

The S&P 500 and Dow Jones closed at record highs last Friday, ushered in by Nvidia’s impressive earnings report, while economic indicators such as January’s Leading Economic Index reflected a bearish tone ahead and existing home sales demonstrate a slower, more historically normal market. Additionally, Amazon has officially joined the Dow Jones Industrial Average, marking a notable accomplishment for the ecommerce giant. Panning back and looking holistically at the state of the US economy and the Fed’s potential next steps, investors are expecting a rate cut by the June FOMC meeting.

Markets fell last week after a higher-than-expected January CPI report, showing a 3.1% annual inflation rate, triggering a selloff with the S&P 500. The increase was fueled by rising transportation, shelter, and food away from home costs, though energy and used vehicle prices dropped. This unexpected inflationary pressure pushed back expectations for a Federal Reserve rate cut.

Markets saw large price swings this week, starting with a sharp selloff in equities after Fed Chair Powell indicated that a rate cut in March was not their base case scenario. Despite this, markets rebounded later in the week, driven by a robust January jobs report that exceeded expectations. The labor market’s strength, coupled with positive consumer confidence, coincide with the realities of a delayed Fed rate cut. Q4 earnings reports showed better earnings growth this week, as Meta’s impressive Q4 performance was surprisingly marked by a new dividend and share buyback plan, leading to a 20% increase in its stock on Friday.

Markets saw large price swings this week, starting with a sharp selloff in equities after Fed Chair Powell indicated that a rate cut in March was not their base case scenario. Despite this, markets rebounded later in the week, driven by a robust January jobs report that exceeded expectations. The labor market’s strength, coupled with positive consumer confidence, coincide with the realities of a delayed Fed rate cut. Q4 earnings reports showed better earnings growth this week, as Meta’s impressive Q4 performance was surprisingly marked by a new dividend and share buyback plan, leading to a 20% increase in its stock on Friday.

In a week fueled by a robust GDP report, equities rose ahead of the January 31st FOMC meeting. The Leading Economic Index for December showed a modest -0.1% monthly decline, indicating a slower decrease but is still in bearish territory.