March’s Federal Reserve policy statement provided less forward guidance than many investors expected. As anticipated, the word “patient” disappeared – but the Federal Open Market Committee also lowered its 2015 GDP forecast (to a range of 2.3-2.7%) and nearly halved its 2015 inflation projection (to a range of 0.6-0.8%). Seconding this weaker economic outlook, the Fed indicated it might wait until late 2015 to tinker with interest rates, altering the commonly held perception that a rate hike might be in store before Q2 ends.1
OIL PRICES RISE
Light sweet crude rose 3.9% on the NYMEX last week, settling at $45.72 Friday. It was the first winning week in five for the commodity, and a short-term decline in the dollar and lower U.S. rig counts helped. Gasoline advanced 2.0% on the NYMEX for the week, natural gas 2.2% and heating oil 1.2%.2
FEWER STARTS, BUT MORE PERMITS
The Census Bureau measured a 17.0% drop in groundbreaking for February, which took housing starts to a 13-month low. Declining builder sentiment, higher construction costs and fewer available parcels were all contributing factors. Building permits increased 3.0% last month; apartment permits jumped 18.3%.3
TERRIFIC WEEK FOR U.S. EQUITIES
A little dollar weakness, a rebound in energy prices, easing in Europe, the latest FOMC statement and pleasing corporate earnings all supported a 5-day rally. From March 16-20, the S&P 500 gained 2.66% to settle Friday at 2,108.06. The Dow and Nasdaq posted weekly gains of 2.13% and 3.17% on their way to respective closes of 18,127.65 and 5,026.42.4
THIS WEEK: Existing home sales figures for February appear Monday, courtesy of the National Association of Realtors. On Tuesday, February new home sales data arrives from the Census Bureau, and the Street also interprets February’s CPI, manufacturing PMIs for Japan and China and earnings from H.B. Fuller, Sonic and Steelcase. Wednesday brings durable goods data for February plus earnings from Pacific Sunwear, Paychex and Red Hat. In addition to the latest initial jobless claims report, Thursday also brings earnings from Accenture, Restoration Hardware, Lululemon Athletica, ConAgra Foods, GameStop, Fred’s Super Dollar and Scholastic. Friday, the University of Michigan publishes its final March household sentiment survey, the federal government’s final estimate of Q1 growth arrives, and Fed chair Janet Yellen speaks on monetary policy in San Francisco.
|% CHANGE||Y-T-D||1-YR CHG||5-YR AVG||10-YR AVG|
|REAL YIELD||3/20 RATE||1 YR AGO||5 YRS AGO||10 YRS AGO|
|10 YR TIPS||0.17%||0.66%||1.50%||1.80%|
Sources: online.wsj.com, bigcharts.com, treasury.gov – 3/20/155,6,7,8
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.
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1 – thestreet.com/story/13084714/1/meaning-of-fed-policy-statement-depends-on-definition-of-is–surprising-market-reaction.html [3/19/15]
2- marketwatch.com/story/oil-prices-stay-choppy-ahead-of-rig-count-data-2015-03-20 [3/20/15]
3 – eyeonhousing.org/2015/03/housing-production-stumbles/ [3/17/15]
4 – markets.on.nytimes.com/research/markets/usmarkets/usmarkets.asp [3/20/15]
5 – markets.wsj.com/us [3/20/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F20%2F14&x=0&y=0 [3/20/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F20%2F14&x=0&y=0 [3/20/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F20%2F14&x=0&y=0 [3/20/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F19%2F10&x=0&y=0 [3/20/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F19%2F10&x=0&y=0 [3/20/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F19%2F10&x=0&y=0 [3/20/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F21%2F05&x=0&y=0 [3/20/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F21%2F05&x=0&y=0 [3/20/15]
6 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F21%2F05&x=0&y=0 [3/20/15]
7 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [3/20/15]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [3/20/15]