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Baker Market Update
2024-03-28

Happy Thursday Everyone! This week’s edition of Baker Market Update comes to you a day earlier than normal, due to our offices and the markets being closed tomorrow in observation of Good Friday.

Monday’s release of New Home Sales data for the month of February showed a month-over-month decline of 0.3% (est. 2.3%) to a seasonally adjusted rate of 662,000 units. Sales of new single-family homes fell unexpectedly in February after mortgage rates increased during the month and the weaker than expected sales figures come despite improving data for housebuilding, which showed housing starts rose about 11% in February, according to the Commerce Department.

On Tuesday, orders for long-lasting U.S. manufactured goods (aka durable goods) increased more than expected in February. Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, rose 1.4% last month. On Tuesday, The Conference Board released its latest Consumer Confidence Index which came in at 104.7, essentially unchanged from a downwardly revised 104.8 in February. Assessments of the present situation improved in March, primarily driven by more positive views of the current employment situation. However, expectations for the next six months slipped to the lowest level since October 2023. Consumers’ outlook for future business conditions, labor market conditions, and income expectations all deteriorated in March.

This morning had several economic releases including initial weekly jobless claims which fell 2,000 to a seasonally adjusted 210,000 for the week ended March 23. Economists had forecasts for 212,000 claims in the latest week. Claims have been hovering in the 200,000 to 213,000 range since February. Most employers are retaining their workers despite a rash of high-profile layoffs at the start of the year. Also released this morning was pending home sales data for the month of February which showed a 1.6% increase (est. 1.5%). Lastly, GDP for the 4th quarter of last year was revised upward from 3.2% to 3.4% according to the “third” estimate released by the Bureau of Economic Analysis.

U.S. Consumer Sentiment topped estimates in March to nearly hit a 3-year high. The University of Michigan’s benchmark Consumer Sentiment Index rose to a final reading for the month of 79.4, the highest reading since July 2021. It surpassed consensus estimates of 76.5 in a poll of economists. Consumer assessments of both current conditions and the economic outlook both improved from the March mid-month and February final readings.

One of the more important economic releases this week will come tomorrow morning as we get updated readings for the Personal Consumption Expenditures (PCE) Deflator Index. Economists expect that the Federal Reserve’s preferred measure of inflation will once again show an increase. The PCE report released tomorrow is expected to show a 0.4% increase for February and the year over year change is expected at a 2.5% increase. Fed officials have signaled that a rate cut is on the horizon and have said they are relying on the data to help them decide on a timeline. Earlier this week, Fed Governor Lisa Cook stated, “the risk of easing monetary policy too much or too soon is that it could allow above-target inflation to become entrenched and halt the progress that we have seen.”

I hope everyone has a great Easter weekend!

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Since 1979, we’ve helped our clients improve decision-making, manage interest rate risk, and maximize investment portfolio performance. Our proven approach of total resource integration utilizes software and products developed by Baker’s Software Solutions* combined with the firm’s investment experience and advice.

Dale Sheller

Author

Dale Sheller
Associate Partner
Director of Financial Strategies Group
The Baker Group LP
DSheller@GoBaker.com
800.937.2257

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