February 18, 2022

Weekly Market Commentary February 14th to February 18th 2022

Producer prices spiked by 1% in January, double the consensus estimate. Driven higher by strong demand and ongoing supply disruptions, this is the largest monthly increase since May 2021. On the heels of the highest annual Consumer Price Index reading in nearly 40 years (7.5%), the Producer Price Index rose by 9.7% on an annual basis. Despite the higher than anticipated monthly reading, it was modestly lower than last January which had the year-on-year rise pull back from the eye-popping 9.8% level reported in December, but not by much.

Higher prices and a global pandemic did not stop consumers from getting out to spend in January. Retail Sales jumped by 3.8% from the previous month. Online sales spiked and purchases of vehicles and building materials were strong contributors to the rise. This was the highest month-over-month gain since March.

Existing Home Sales advanced more than anticipated in January. The reading was 6.7% higher (at a 6.5 million unit annualized pace) than the revised December level of 6.1 million. There were mixed results in other real estate data with Housing Starts missing the mark, lower by -4.1% and Building Permits edging 0.7% higher.

Investors closely scrutinized the minutes from the last Federal Open Market Committee (FOMC) meeting which offered little new information to guide expectations on the size of the first rate hike. The 10-Year U.S. Treasury yield closed at 1.92% after trading in a range of 1.91% to 2.06% in a volatile week.

Geopolitical risks, including escalating tensions with Russia over concerns of a potential invasion of Ukraine, weighed on risk assets this week. The S&P 500 closed the week lower by -1.6% to 4,348. The NASDAQ Composite declined by -1.8%.

Both the stock and bond markets will be closed on Monday in celebration of President’s Day. Key economic releases thereafter include Consumer Confidence, an updated Q4 GDP estimate, New Home Sales, Durable Goods Orders and Personal Income and Outlays.

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