March 20th – Weekly Update

  • The Federal Open Market Committee (FOMC) hiked rates 25 basis points (bps) in another stagnant week for U.S. equities. The S&P 500, Nasdaq and Dow Jones each ticked up slightly. Gold strongly jumped in reaction to the FOMC announcement, oil was down for the period. The 10-year U.S. Treasury yield closed at approximately 2.50%.
  • The FOMC increased rates by 25 bps, as expected. The statement reiterated that the labor market has continued to strengthen and economic activity has continued to expand. The Federal Reserve (Fed) continues to expect a total of three rate hikes in 2017, and the median forecast for another three in 2018 remains unchanged.
  • In her press conference, Fed Chair Janet Yellen said that the economy is doing well and gross domestic product (GDP) is a “pretty noisy indicator”. She further noted uncertainty surrounding fiscal policy.
  • On the policy front, growing complications with health care reform is being viewed as delaying tax reform. President Trump agreed to make what he characterized as minor changes to the current health care bill, including giving states the ability to impose work requirements on able-bodied Medicaid recipients, as well as the option to block grant Medicaid.
  • Jobless claims remained solid, coming in at 241K for the latest week. That was slightly better than the 242K consensus estimate and down 2K from the prior week. The four-week moving average rose slightly to 237K, but remained near cycle lows.
  • The Bureau of Labor Statistics released the February Consumer Price Index (CPI) data, headline CPI rose 0.1% month-to-month following a 0.6% increase in January and above the consensus for a flat reading. On a year- over-year basis, headline CPI rose 2.7% and core prices fell from 2.3% to 2.2%.
  • The New York Fed manufacturing index beat expectations, coming in at 16.4 in March vs. the expected 15.0, but down from 18.7 in February.
  • A strong homebuilder sentiment reading aligned with the general perception of rising economic confidence. The National Association of Home Builders (NAHB) Index rose to 71 in March, a 12-year high and up from 65 in February, which was also the consensus estimate.

CPWM Weekly Market Monitor (2017.03.20)