The market has abandoned the belief a rate cut would occur in March. There are also whispers that a potential June cut may be followed by additional easing later in 2024.
On Wednesday, the minutes from the FOMC’s January meeting were released to the public. As many assumed, the Fed said that it was waiting for greater signs that inflation was heading closer to 2 percent before making any changes to the existing interest rate. Furthermore, the FOMC said that it would be paying close attention to potential inflation risks such as elevated housing prices or steady demand for services.
The next inflation report will be issued on March 12, and it is believed that the inflation rate should be under 3 percent at that point. However, this assumes that jobs data and inflation figures from January were a seasonal outlier and not a sign of prolonged economic strength.
On Thursday, a number of reports were issued that had an impact on American markets. First, the Flash Services and Flash Manufacturing PMI were released and came in at 51.3 percent and 51.5 percent respectively. The services figure was below analysts’ estimates of 52.4 percent while the manufacturing figure was higher than the analyst estimate of 50.5 percent prior to the release. Regardless, these figures indicate that demand for both manufacturing and services are expanding at a moderate pace.
Unemployment claims data revealed that 201,000 people filed for benefits in the last seven days. This was much lower than the 217,000 projected requests for benefits as well as lower than last week’s figure of 213,000. Finally, existing home sales data was released and revealed that four million homes had been sold over the previous months. The figure beat last month’s result of 3.88 million sales as well as analyst estimates of 3.96 million sales. An increase in home sales may release some pressure on rising prices, which may help to moderate overall inflation.
The S&P 500 was up 1.38 percent this week to close at 5,088. On Wednesday, the market hit a low of 4,950 before rebounding to hit a high of 5,110 on Friday.
Like the S&P, the Nasdaq was also a net gainer for the week finishing up 109.77 points to close at 15,996. The Nasdaq hit its low of the week on Wednesday when it dipped to 15,482 and hit its high on Friday at 16,118.
Finally, the Dow was up more than 420 points to finish at 39,131 for the week. As with the other major indexes, it would make a low of the week on Wednesday before rebounding and making a high on Friday. The weekly low was 38,390 while the weekly high was 39,255.
There were a variety of news reports released outside of the United States that might have some bearing on domestic markets. Canada revealed on Tuesday that inflation remained flat in January and that inflation dropped to 3.3 percent on an annualized basis. In China, officials revealed on Monday that the interest rate on loans with a term of one year was being dropped from 4.1 percent to 3.95 percent.
On Thursday, most of the major European economies released their own Flash Services and Manufacturing PMI numbers. Most nations reported a contraction in their manufacturing sectors but an increase in demand for services. Finally, the EU reported that inflation across the region was 2.8 percent on an annualized basis.
This upcoming week is going to be full of important news releases in the United States and abroad. In the United States, the CB Consumer Confidence report, initial GDP figures and revised University of Michigan consumer confidence and inflation figures will be made public. Internationally, New Zealand, Australia and Japan will release their most recent inflation numbers while Germany and other European nations will do the same.