Weekly Market Commentary March 4th to March 8th 2024
Federal Reserve Chairman, Jerome Powell’s, testimony on Capitol Hill was largely viewed as dovish by market participants but commentary remained relatively unchanged. He confirmed that the U.S. economy remains strong, despite restrictive monetary policy. Much of the testimony was uneventful as Mr. Powell carefully dodged questions regarding Ukraine funding, immigration and fiscal policy that did not directly relate to the Fed’s dual mandate of stable prices and low unemployment. In response to the overall “dovish” tone, the 2-Year U.S. Treasury fell 5 bps for the week.
For the second straight year, Powell’s comments about a strong and resilient banking sector coincided with regional banking turmoil. New York Community Bank announced on Wednesday that it raised capital through a private placement to restore investor confidence and shore up its balance sheet, fearing depositors may withdraw their funds. Coming to its rescue was Former Treasury Secretary Steve Mnuchin, Founder of Liberty Strategic Capital, who raised $1 billion and will join the board moving forward. New York Community Bank is currently the 28th largest bank in the U.S. with more than $116 billion in assets.
February’s Unemployment Report was more supporting evidence that the Fed is making progress toward a soft landing. Non-Farm Payrolls increased by 275k, outpacing the 200k jobs that economists were expecting. The following sectors provided job growth, health care (67k), government (52k), and restaurants (42k). Unfortunately, job creation has been skewed toward part time positions as full-time jobs decrease as people have taken on second jobs. This can be seen in the Unemployment Rate, which ticked higher to 3.9%, from a 3.7% reading in January. Job Openings remained unchanged at 9 million and outnumbered the unemployed 1.4 to 1. Ultimately, this report is unlikely to change the path of anticipated cuts moving forward.
Both February’s Services Indices, the U.S. Services ISM and PMI were released this week and showed expansion. The ISM Services Index recorded a 52.6 reading, slightly below the expected 53.0 but underlying components for ISM Services Index showed inflationary pressures and that labor cost increases remain a challenge. Services readings remain important as they have been a key driver of U.S. economic strength over the past year.
The S&P 500 experienced only its third decline in the last nineteen weeks, barely. The index was little changed finishing at 5,124, down -0.25% while the Dow Jones Industrials fell 0.93% finishing at 38,722 and the Nasdaq fell 1.17% to 16,085. 10-Year U.S. Treasury yields fell 10 bps to 4.09%.
Key economic releases next week include inflation data, both Consumer Price Index (CPI) and Producer Price Index (PPI) and Retail Sales.
