Federal Reserve Minutes Show Resolve To Raise Rates… The minutes from the last meeting revealed that a majority of the voting members favor pushing rates over 5%, with a third of them advocating for at least 5.25%.
What it means—The 10-year and 30-year Treasury bond yields are back near 4%, and the minutes weighed on the equity markets as investors took to the Fed’s message to heart. The consensus estimate now is for the Fed to raise rates to an average of 5.4% in this cycle. The question is whether they can do that without pushing the economy into a recession. Inflation has eased a bit, even though the labor market hasn’t budged. Let’s hope the Fed finds a reason or two to step away from further rate hikes after March.
January Existing Home Sales Fall to Annualized Rate of Four Million, Lowest Since October 2010… Sales volume dropped 37% over the past two years.
What it means— While activity went in the deep freeze, prices didn’t follow. The median existing home sale price has fallen 13% from the high last June. That’s painful, but it is a long way from the drop in activity. With the prime selling season just around the corner, we’re about to find out if mortgage rates over 6% are a deal killer or just an obstacle. While rents might be decelerating, they aren’t falling, which should drive some first-time homebuyers into the market.
January New Home Sales Rose 7.2% From December to 670,000 Units Annualized… The sales rate far outpaced the estimate of 620,000 units.
What it means- Let’s not read too much into rising new home sales. The sales pace is 19.4% lower than a year ago, and January numbers are always squirrelly because of seasonal adjustments due to weather. Perhaps a more telling detail was that the median new home sale price dipped 3.3% to $427,500. That’s not a big drop, but it does imply pricing pressure. There were 439,000 new homes for sale last month. At the current sales pace, that’s 7.9 months of supply. Builders are still playing it close to the vest by not overloading the market with inventory, which should keep prices from free-falling.
Personal Consumption Expenditures (PCE) Index Up 0.6% in January, Up 5.4% Over Last Year… Wall Street expected a lower monthly gain of 0.5%.
What it means— Excluding food and energy, the PCE increased 4.7%, which was also hotter than Wall Street expected. The numbers reaffirmed what central bankers have been saying all week. Unless something changes, investors should expect rates to remain elevated throughout the year. That wasn’t good news. Equity markets sold off after the data release.
Palm Coast, Florida, Man Breaks into Convenience Store, Leaves Behind Debit Card… Deputies responded to a burglar alarm at the closed store in the early morning hours, and the store owner showed them surveillance footage and a debit card left by the cash register. The deputies recognized the man on film from a car fire near the store the previous night. They tracked down the man, who said he left his debit card on the counter on purpose so that he could return and pay for the items he took. He said, ‘I didn’t want to steal anything, you know, that’s against the law.” The deputies returned his debit card then arrested him for burglary and theft.
Data supplied by HS Dent Research
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