Hello, this is Claire Ellerhorst, Senior Portfolio Manager at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices finished higher for a second straight week, with the S&P 500 Index gaining 1.4% in total return. The Nasdaq Composite added 1.7% and the Dow Jones Industrial Average rose 1.2% for the week. The modest gains for equities came amid a volatile week in Treasuries, continued concern about the global banking situation and a Federal Reserve policy meeting.
Fed policy makers voted unanimously to hike the Fed funds rate by a quarter percentage point last week, in line with expectations. The language in the statement from the central bank was modified to note that "additional policy firming may be appropriate," leaving some uncertainty in the path for rates ahead. Fed Chair Powell said in his press conference that officials do not expect to cut rates this year, but market pricing suggests expectations for a pause ahead and loosening policy by year-end. While the Fed noted in their statement that the banking industry remains on solid footing today, it is our view that stresses in the banking industry will test the Fed’s inflation fighting resolve prospectively. Treasury Secretary Janet Yellen said mid-week that she has not considered blanket insurance for U.S. banking deposits without Congressional approval, but later stated the Treasury is prepared to take additional actions to ensure safe deposits if warranted.
In economic news, the February report on U.S. existing home sales showed an increase of 14.5% last month, better than expected and the largest monthly increase in nearly three years. The median existing sales price ticked lower year-over-year, ending a record streak of 131 consecutive months of annualized price increases. New home sales rose 1.1% in February to an annualized rate just shy of consensus. Jobless claims came in under 200,000 for another week. Strength in the labor market remains a key upside risk to the Federal Reserve’s tightening path.
In the week ahead, economic releases include consumer confidence, pending home sales and personal consumption expenditures. Several Federal Reserve officials are scheduled to speak throughout the week.
As always, we’ll be watching and reporting back to you. Thank you.