Weekly Market Commentary August 15th to August 19th 2022
The Federal Open Market Committee released minutes from its July meeting. Vague reference to a slowing of policy rate hikes “at some point” were perceived as more dovish, despite no substantive reference to a policy pivot. Investor sentiment turned noticeably positive after the release and the probability of a 75 basis point hike next month (which had been as high as 70%) dropped below 50%.
Retail Sales from the prior month surprised to the upside when excluding volatile gasoline and auto prices. Spending online, at retail stores, and on building materials were key areas of strength. Spending on gasoline was lower, based on price declines, not on any fall off in consumption.
Existing Home Sales declined by 5.9% in July to 4.81mm units, off by 20% from one year ago. Housing Starts declined 9.6% in the month to 1.45mm units. Single-family home starts declined for a fifth straight month, now down 25% from the December 2021 highs. Homebuilders have shifted to building more affordable multi-unit properties. Building Permits are lower by 1.3% with the drop in single-family permits exceeding the rise in multi-family.
The S&P 500 closed lower for the week by 1.2% to 4,228. The NASDAQ Composite was off by 2.6%, led lower in the final session of the week by a pull back in large cap technology stocks. After pulling back modestly early in the week, the yield on the U.S. 10-Year Treasury closed the week 14 basis points higher than were it started to 2.97%.
Key economic releases next week include a second estimate of Q2 U.S. GDP, Durable Goods Orders, New Home Sales, and Consumer Sentiment.