Weekly Market Commentary September 18th to September 22nd 2023

The latest FOMC meeting concluded with a “hawkish pause” as anticipated. The Fed left short-term rates unchanged, noting the expectation of one incremental hike later this year shown in their dot plot. Their projections reigned in expectations for the magnitude of potential rate cuts (market participants have been looking for) next year, providing a “higher for longer” narrative (as long as a hard landing recession is avoided.)

Housing Starts showed continued signs of weakness. The seasonally adjusted rate in August of 1.28 million units was lower by 11.3% and the lowest level since the June 2020 pandemic lockdowns. Building Permits were however higher by 6.9% to 1.54 million units. Projects with capital costs locked in before significant rate increases may be brought forward to hold on to less expensive financing. The Existing Home Sales report added incremental gloom to the housing picture, down by 15.3% year-over-year.

Weekly Jobless Claims came in lower than anticipated this week at 201k, well below the previous reading and consensus estimates. A decline in claims in three of the last four weeks is showing the labor market’s resilience. While striking UAW workers are not eligible to apply, any employees laid off at plants unable to operate due to targeted strikes will be in the mix in the coming weeks.

The S&P 500 index pulled back by 2.9% for the week, closing at 4,320. The Nasdaq composite was off by -3.6% at the final bell for the week. Bond yields rose following the “higher for longer” Fed narrative. The 2-Year U.S. Treasury yield closed at 5.10% as it reached levels not seen since 2006. The bellwether 10-Year ended the week higher by 11 basis points at 4.44%.

Key economic releases next week include U.S. Consumer Confidence, Durable Goods Orders, Personal Income & Outlays and New Home Sales.