Weekly Market Commentary March 18th to March 22nd 2024

The Federal Open Market Committee met this week and left interest rates unchanged, as expected. The dot plot of forward rate expectations shifted (nine members projecting two cuts in 2024 and 10 holding the line on three cuts), while the median projection remained at three cuts by a narrow margin. Fed Chair Jay Powell faced a number of questions in the subsequent press conference regarding the Committee’s revised projections for an increase in near-term economic growth and core inflation levels. The probability of a 25 basis point rate cut in June now stands at 82% as priced in through the futures markets. There was little mention of any change to the balance sheet run off of Treasury and mortgage-backed securities, with hints that tapering discussions may occur in the next few meetings.

The U.S. housing market had some positive news for a change. Housing Starts rebounded from weather related weakness earlier in the year. The 10% seasonally adjusted annual rate of increase in February is the most since May. Builders are citing renewed interest in new homes with mortgage rates dipping below 7% and a limited inventory of existing homes for sale. Building Permits grew at a 2% pace while January data was revised upward as well. Existing Home Sales were also stronger in the month, higher by 9% and ahead of expectations. The report noted that consumers may be accepting the “new normal” of higher mortgage rates and coming to terms with the fact that 3% mortgages are a thing of the past.

The S&P 500 closed at a new record high following the Fed’s press conference on Wednesday and went on to close with the highest weekly gain of the calendar year. The S&P was higher by 2.3% and Nasdaq Composite by 2.8%. The yield on the 10-Year U.S. Treasury declined by 10 basis points to 4.21%.

Key economic events we will be keeping an eye on next week include New Home Sales, Durable Goods Orders and Personal Income & Outlays.