Economic Data

Housing Starts for February came in at 1.77 million, beating market expectations of 1.7mm and the prior months revised number of 1.657mm. This was a 6.8% increase month over month, beating expectations of an increase of 3.8% and was also a nice bet of January’s revised 5.5% drop. Single family starts increased 5.7% for the month, at a pace of 1.22 million units. Multifamly starts increased 554,000, which was the highest since January 2020. Building permits for February came in at 1.859mm, beating market expectations of 1.85mm, but came in under January’s revised number of 1.895mm. This was a drop of 1.9% month over month, beating market expectations of a 2.4%, although it was still below January’s 0.7% increase. Housing starts at 1.77 million is the strongest pace since 2006, which is a strong number.

US initial weekly jobless claims fell to 214,000 for the week of March 12, beating expectations of 220,000, and is a drop of 15,000 from the prior week. Continuing claim for the week of March 5th were at 1.419 million, which is down from the prior weeks 1.49 million, a 71,000 drop. The four week moving average is now at 223,000.

The Philly Fed Index for March came in at a level of 27.4, which is a strong beat from market expectations of 14.5 and from last month’s level of 16.0. The prices paid index continued to rise at 81.0, compared to 69.3 versus last months, and prices received index also rose to 54.4 versus the prior month’s 49.8. The employment index also climbed to 38.9 versus last months 32.3.

Industrial Production for the month of February came in as expected +0.5% month over month. Capacity utilization rose to 77.6%, which missed expectations of 77.9%, but is up from last month’s revised number of 77.3%. Manufacturing production came in at 1.2% m/m, a bit higher than expectations of 1.0%, and much higher than the prior months revised number of 0.1%. Production at US factories rose by the most in four month in February.

Looking at the economic calendar for the remainder of the week, we have Existing Home Sales (Feb) and Leading Economic Indicators (Feb) on Friday.

Headlines, The Fed, & Other News

The Bank of England (BoE) increased its benchmark rate for the third consecutive time bringing it to 0.75% from 0.5%. Their statement regarding future rate hikes was a bit muted saying "The Committee judged that some further modest tightening might be appropriate in the coming months, but there were risks on both sides of that judgement depending on how medium-term prospects evolved.”

The Fed raised the federal funds target rate yesterday by 0.25%, and the hike is the first of several to come. In the Fed’s dot plot, the median projection for the benchmark rate at the end of 2022 is about 1.9%, which is higher than the previous projection by the Fed but it is in line with what the market was pricing in. They are forecasting the target rate to go to about 2.8% at the end of 2023. Chairman Powell did say that every meeting is now a live meeting, looking at the dot plot the Fed is projecting a 0.25% rate increase each meeting in 2022.

Market Analysis

The Fed increased rates as expected yesterday, and their projections matched what the market priced into the market. I saw some strategists call it a dovish surprise but it was priced into the market so it shouldn’t have caught too many people off guard. The 10 year did hit 2.24 during the press-conference yesterday, getting very close to 2.25%, which is a level of support on the 10 year. Overnight the 10 year traded as low as 2.10. Looking at an hourly chart, we in a nice uptrend beginning on 3/7 on the 10 year, just something to keep an eye.

Currently the 10 year is at 2.16, UM30 3.5 in May is up 6/32, and the Dow is up 150 points.