While the headline inflation rate for March was low, core inflation, excluding volatile food and energy, still remains about 5% from a year ago, well above the Federal Reserve’s target.  Producer prices fell in March and are trending closer to the FED’s 2% target.  Consumer spending is falling and unemployment has risen.  While some traders were speculating that the FED is nearing it’s peak in interest rates, this was moderated by comments from FED member Christopher Waller.  Waller on Friday said inflation remains too high and “Monetary policy needs to be tightened further.”

The FED released the minutes from its March meeting.  Several FED members considered pausing rate hikes but ultimately chose to raise rates 0.25% after they believed that the bank failures would not spread.  Other members were in favor of a larger 0.5% hike citing inflation well above target and tightness in the labor market.  The FED forecast that the U.S. will enter a recession later this year but may kike another 0.25% in May.  The Bank of Canada met and decided to leave its benchmark interest rate at 4.5% for the second meeting in a row.  The BOC did say they would raise rates further if needed to bring inflation down to 2%.

First quarter corporate earnings announcements have started and so far blended earnings are showing declines from a year ago.  However, several large banks have reported large upside surprises on earnings.

Treasury bond yields rose with the 30-year bond yield at 3.736% and the 10-Year note at 3.515%.  Freddie Mac reported that 30-year mortgage rates fell to 6.27%.  Crude oil rose to $82.65 a barrel and natural gas rose to $2.112 per MMBTUs.  The U.S. dollar index fell to 101.58 and gold fell to $2019.20 an ounce.

• The International Monetary Fund lowered it’s forecast of global growth to 2.8% for this year.
• The Commerce Department reported:
  • Wholesale inventories rose 0.1% in February after falling 0.6% in January.

• Retail sales fell 1.0% in March following a revised 0.2% drop in February.
  • Gas stations saw a 14.2% decline.
  • Electronics and appliance store sales fell 10.3%.
  • Food services and bar spending rose 13.0%.

• The Labor Department reported:
  • The Consumer Price Index rose a seasonally adjusted 0.1% in the month of March, down from 0.4% rise in February.
    • From a year ago the CPI index is up 5.0%.
    • Core prices, excluding volatile food and energy rose 0.4% in March and 5.6% from a year ago.
    • Shelter prices rose 0.6%.
    • Energy prices fell 3.5%.
    • Food prices were unchanged.
  • The Producer Price Index fell 0.5% in March following no change in February and a 0.4% increase in January.
    • Core producer prices, excluding volatile food and energy, rose 0.1% in March.
    • The biggest decline was in Energy which fell 5.1% in March.

• • The U.S. created 236,000 jobs in March, the lowest since December 2020 but still historically strong.
    • This was down significantly from 504,000 in January and 311,000 in February.
    • The unemployment rate fell from 3.6% to 3.5%.
    • The labor force participation rate rose from 62.5% to 62.6% of the working age population but still remains below the pre-pandemic level of 63.3%.
    • Average hourly earnings rose 0.3% in March and are up 4.2% from a year ago.
  • Seasonally adjusted first-time claims for unemployment were 239,000 up from 228,000 in the prior week..

• • • The 4-week moving average of claims, designed to smooth out volatility, was 240,000 down from a revised 237,750 in the prior week.
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: http://ir.eia.gov/wpsr/wpsrsummary.pdf .  Also, the EIA reported in the prior week:
  • Field production of crude oil rose from 12.2MM BPD to 12.3MM BPD.
  • Natural gas storage rose 25BN cubic feet and is above the 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs fell 2 to 588.  The number of active natural gas rigs fell 1 to 157.
• Factset reported that with 6% of S&P 500 companies reporting earnings, the blended earnings decrease was 6.5% from a year ago.

Please call us if you have any questions.

Loren C. Rex, CFP^®, MA                                                                      Erik A Smith, AIF®

Founder / Emeritus                                                                            President & C.E.O.                                  

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.

 Sources:

https://www.bls.gov/news.release/empsit.nr0.htm

https://www.census.gov/economic-indicators/#wholesale

https://www.bls.gov/news.release/cpi.nr0.htm

https://www.bls.gov/news.release/pdf/ppi.pdf

https://ir.eia.gov/ngs/ngs.html

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W

https://www.census.gov/retail/sales.html

https://www.wsj.com/market-data/bonds?mod=nav_top_subsection

https://www.factset.com/earningsinsight