What a difference a few weeks makes.
- The Dow Jones Industrial Average has recouped the over 2000-point loss from late last year.
- Oil prices are now at $40.00 a barrel and rising.
- This is what is primarily fueling the stock recovery.
Just a short time ago, everyone was expecting the Fed to raise interest rates at the March meeting.
- On Wednesday, the Fed announced they were leaving interest rates alone.
- Additionally, they indicated that instead of the expected four planned rate increases for 2016, there will likely only be two of them based on current trends.
In January, the Fed’s assessment of the economy was labeled as “solid”.
- Today’s announcement showed a change in sentiment as the Fed statement now uses the word “moderate”.
- Additionally, they also modified their sentiment on business investment from “advancing” down to “soft”.
- The positive in the Fed report is that they continue to use the word “strong” to describe the labor market.
The report on housing starts was mixed with starts way up, however permits are way down.
- Starts rose 5.2 percent for the month of February.
- Permits, which are an indication of market direction, declined 3.1 percent.
- The starts for single-family homes were up 7.2 percent and the permits for this sector were up 0.4 percent.
- The weakness in the report was mostly centered on multi-family construction.
With mortgage rates creeping up slightly, the impact was felt in refinance applications according to the Mortgage Bankers Association of America.
- The MBA reported that for the week ending March 11th applications for refinances declined 6.0 percent.
- Applications for purchases rose 0.3 percent.
The housing market index is showing that demand for new homes is solid.
- A lack of available lots for building is continuing to hold back construction growth.
- The housing market index came remained unchanged but still indicates a relatively strong market.
First time jobless claims continue to remain at a very low level confirming the health of the labor market.
- Initial claims rose slightly from a revised 258,000 up to 265,000.
Inflation on the wholesale level continues to remain soft.
- It seems that most attempts to raise prices in this sector are being met with great resistance.
- Prices for consumer are rising slightly.
- The Fed’s target rate of 2 percent annual inflation is still not being met, but overall prices appear to be rising.
- The fact that inflation has been remaining stable is a key reason for the Fed keeping rates where they are.
Next week week’s potential market moving reports are:
- Monday March 21st – Existing Home Sales
- Tuesday March 22nd – FHFA House Price Index
- Wednesday March 23rd – MBA Applications & New Home Sales
- Thursday March 24h – First Time Jobless Claims & Durable Goods Orders
- Friday March 25th – GDP