Here is Your Weekly Market Update
MARKET MOVING NEWS THIS WEEK | |
This week’s is filled with important economic indicators and corporate updates that could significantly impact market sentiment and economic forecasts. Here's a breakdown of key events to keep an eye on:
Of particular interest will be the PCE inflation data on Friday, as investors and policymakers closely monitor inflationary pressures amid ongoing economic recovery efforts. Forecasters predict that the core PCE index likely went up by 0.27% in March. This would bring the 12-month rate down to 2.7% from 2.8% in February. The 6-month annualized rate, which spiked to 2.9% in February, would dip to 2.8%. Meanwhile, with the core PCE index increasing by 0.27% in March, the 3-month annualized rate would go up from 3.5% in February to 4% in March, after falling to 1.6% in December. This will send mixed signals to the market. Don’t expect a big movement in rates this week. Proceed with caution.
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Alright, let's dive into the recent inflation and market trends, shall we?
So, here’s the scoop on inflation: it's been on the rise lately, and the latest stats are a bit worrisome. In March, the overall US Consumer Price Index (CPI) shot up to 3.48% year-over-year (YoY), the highest since last September. And this isn’t a one-time thing; it's been climbing steadily, hitting 3.15% in February and 3.09% in January.
Now, let’s zoom in on a crucial metric, the US Core CPI (excluding Food and Energy). It also went up, hitting 3.80% YoY in March from 3.76% in February. This bump marks the first rise in core inflation since March 2023, hinting at some broader and consistent price pressure. Basically, prices are on the upswing across the board.
So, why the sudden jump in CPI from 3.1% in January to 3.5% in March? Well, a bunch of things played into it. We saw inflation rates spike in different sectors like Transportation, Electricity, Medical Care, Gasoline, Apparel, Used Cars, Gas Utilities, and Fuel Oil.
Speaking of gas prices, they've shot up like a rocket, climbing 16% since the start of the year and hitting their peak since last October ($3.71 per gallon national average). If you're in California, you're probably feeling it even more. This spike in fuel costs has flipped the script on falling gasoline prices, which helped keep CPI relatively low throughout 2023. And the details matter: Transportation costs have stayed stubbornly high, soaring by 10.7% over the past year. Insane insurance rates are a big part of that, jumping a whopping 22% over the last year, the biggest one-year jump since 1976.
Now, here's a fun fact: the US has been dealing with inflation rates above 3% for 36 straight months now. That’s the longest stretch of high inflation since the late '80s and early '90s. Housing inflation, which is the biggest chunk of CPI, has been above 5% for 24 straight months, the longest streak since the early '80s. That’s the shelter part of the deal.
At the start of the year, folks were expecting the Federal Reserve to slash rates like crazy, with projections of 6-7 cuts in 2024. But hold your horses, because a hotter-than-expected inflation report has thrown a wrench in the works. Now, the market's only banking on 2 rate cuts, and the first one isn’t expected until September. This shift signals growing worries about how long and how strong these inflationary pressures are gonna stick around, hinting that the economy might be in for a tougher time with inflation than we thought. People are making and spending money, and the economy’s humming along.
Now, let’s talk market activity. In March, Existing Home Sales in the US took a dip, dropping by 4.3% to a 4.19-million-unit annualized pace after peaking in February. But don’t panic just yet; it’s the second-highest sales level since May of last year, so it’s not all doom and gloom.
Despite the drop, homes are spending less time on the market, and more of them are selling above list price. That’s a good sign as we head into the spring buying season. Plus, housing inventory is on the upswing, with a 4.7% increase from February and a hefty 14.4% jump from a year earlier, totaling 1.11 million homes up for grabs by the end of March.
But hold on, there’s a twist in the tale: new construction took a hit in March, with Housing Starts plummeting nearly 15% from February, especially hitting single-family home construction. Factors like higher interest rates, inflation, and rising costs on the supply side are to blame, showing some rough patches in the construction sector.
Despite all that, the balance between housing supply and demand is still tipped in favor of sellers, keeping those home prices up. So, if you're eyeing homeownership for wealth-building, now might be the time to strike while the iron’s hot. Keep in mind, though, that headlines about rising inventory don’t mean the demand has dried up. Last week, mortgage applications were up 3.3% despite higher rates.
In March, New Home Sales spiked by 8.8%, beating expectations. Even though there was a revision in the previous month's figures, the adjusted increase still stands at an impressive 5%. The inventory of new homes for sale also saw a bump, with 477,000 homes up for grabs by the end of March, contributing to a slight dip in the months’ supply of homes.
But here’s the kicker: completed homes available for sale are still scarce, with only 89,000 against the pace of sales, resulting in a measly 1.53 months’ supply. Despite these challenges, the median home price climbed to $430,700, marking a nearly 6% increase from the previous report.
And here’s some food for thought: the percentage of builders cutting home prices is on the decline, signaling a shift in the market. Early data for April shows a further decrease in this trend. So, while home prices might seem to be cooling off, it’s more about buyers bidding on smaller homes rather than builders slashing prices left and right.
