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 last week, after posting declines for the month of February. The S&P 500 Index rose just shy of two percent in total return for the week, while the Nasdaq Composite added 2.6% and the Dow Jones Industrial Average rose 1.9%.
Market participants continue to debate the possibility of a soft landing and what the Federal Reserve’s interest rate path looks like from here. Fedspeak was mixed, with Fed Governor Waller supporting a higher terminal rate should positive economic data surprises continue, while Bostic said he is still in favor of a quarter percentage point rate hike at the March meeting. While a 25-basis point hike in March continues to be the consensus, market pricing has pushed out expectations for a Fed pivot lower into next year.
On the economic calendar, January headline durable goods orders fell more than expected, reversing some of December’s increase. However, core capital goods orders, a proxy for business investment, unexpectedly rose for the month. Pending home sales rose for a second straight month in January, while the S&P Case-Shiller home price index rose in line with estimates. February’s Institute for Supply Management’s Manufacturing Purchasing Managers’ Index (PMI) came in at 47.7, slightly below estimates but an improvement from January’s reading. The Conference Board’s consumer confidence index missed estimates, dropping more than 4 points from January to a reading of 102.9 for February. Weekly jobless claims fell and continued to hold below 200,000 for a seventh straight week, reinforcing the resiliency in the labor market despite Fed tightening.
In the week ahead, Federal Reserve Chair Jerome Powell testifies on monetary policy to Senate and House banking committees. The central banker will likely tell Congress that the Fed remains data dependent and has more work to do to bring inflation closer to target. On Friday, the Bureau of Labor Statistics releases its monthly employment situation report for February. Nonfarm payrolls are expected to have posted a healthy gain, after an outsized increase in January. Average hourly earnings and the unemployment rate will also be closely watched.
As always, we’ll be watching and reporting back to you. Thank you.
