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03/29/2016
Market Update

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The markets hate uncertainty and we saw that play out last week. Stocks fell across the globe as Tuesday’s terrorist attack in Brussels, a dip in commodity prices and renewed fears of a Fed rate hike took their toll. On the other hand, the economy brought a spring mix with good news from housing and jobs that was dampened by a strengthening U.S. dollar and a gloomy manufacturing picture out of China.
This Week
  • The markets hate uncertainty and we saw that play out last week. Stocks fell across the globe as Tuesday’s terrorist attack in Brussels, a dip in commodity prices and renewed fears of a Fed rate hike took their toll. On the other hand, the economy brought a spring mix with good news from housing and jobs that was dampened by a strengthening U.S. dollar and a gloomy manufacturing picture out of China.
  • U.S. gross domestic product rose by 1.4% in the fourth quarter, an improvement on last month’s estimate of 1% growth. The new reading shows increased consumer spending on services, pointing to continued confidence about the domestic economy.
  • U.S. new home sales advanced by 2% in February. Demand from homebuyers and confidence among home builders rose with the daffodils, presenting positive signs for the economy.
  • Existing home sales continued to retreat in February with a 7.1% decline to the second-lowest rate since February 2015, primarily due to a lack of available homes on the market. This reading signals a downgrade for housing, a sector that was expected to lead 2016’s economy.
  • U.S. home prices climbed in January by 0.5% according to the FHFA’s index. Rising home prices are more important than ever to household wealth because of a lag in wage growth.
  • Initial U.S. jobless claims have held at near-record lows and pointed to another month of solid job growth. For the week of March 19, initial claims fell back to 265,000. Continuing claims fell by 39,000 in the week of March 12 to 2.179 million, with the 4-week average at 2.207 million.
  • New mortgage applications declined by 1% in the week of March 18, reducing the year-over-year increase to a still-robust 25%. Refinancing applications fell sharply by 5% in spite of a drop in the average rate for 30-year loans to 3.93%.
  • Durable goods, a main gauge of U.S. manufacturing health, struggled in February. New orders fell by 2.8%, partially reversing January’s gains. Despite the decline, some economists hope that a strengthening housing market will enliven the manufacturing sector, due to increased demand for durable goods such as kitchen and laundry appliances.
  • Britain’s consumer price index rose a modest 0.2% in February due to flat prices in transportation and miscellaneous goods and services. Food/drink and restaurants/hotels gave a slight boost to this month’s reading, which left the annual inflation rate unchanged at 0.3%.
  • Chinese factories and retailers disappointed in the first two months of 2016, thanks to reduced demand and excess capacity. Industrial production grew by 5.4% in January and February, falling short of the 5.6% growth forecast by economists. Retail sales growth also slowed for the same period, showing a 10.2% growth rate, down from December’s 11.1% increase. One bright spot was investment in factories, buildings and other fixed assets, which advanced faster than expected at 10.2% year-over-year during the period.

 

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