Stock indices rose sharply this week after several had fallen to bear market territory.  The beaten down Nasdaq index had the largest gains for the week.  The gains came despite higher producer inflation and Federal Reserve interest rate hikes. 

Oil prices eased somewhat from recent highs as traders focused on the release of 60MM barrels from global strategic reserves and doubt about near term Chinese growth as a surge in Omicron cases was met with the severe shutdowns in part of the country.

There were no major changes in the Ukraine war.  There were some comments from Ukraine about the Russian demands being more realistic but there was no movement towards any agreement or a cease fire as Russia continued to pound Ukrainian cities with missiles and Ukraine continued to take out Russian tanks and slow or in some cases reverse the Russian advances.  The U.S. has pledged more weapons for Ukraine but still has not agreed to Ukraine’s request for more jets or a no fly zone.

The Federal Reserve met this week and hiked short term interest rates from a range of 0% – 0.25% to 0.25% – 0.50%.  Many had feared the first rate increase would be half a percent but it ended up only being 0.25%.  Based on the estimates of Fed members, there may be a total of 6 quarter point hikes this year although some members are calling for half point increases to fight inflation. 

The Bank of England raised interest rates for the third time with the short term rate now at 0.75% and stated further increases may be needed to step inflation.

The Bank of Japan chose to leave interest rates and asset purchases unchanged and downgraded its outlook for economic growth.  Inflation has been quite a bit lower in Japan which allows for continued monetary stimulus.

Treasury yields rose with the 30-year bond yield at 2.414% and the 10-Year note at 2.146%.  U.S. crude oil eased to $104.58 a barrel and natural gas rose to $4.937 per MMBTUs.  The U.S. dollar index fell to 98.21 and gold fell to $1919.50 an ounce.

In the economic numbers:

• The Commerce Department reported retail sales rose a seasonally adjusted 0.3% in February versus January.  This is down from the January increase of 4.9%.  Retail sales are not adjusted for inflation which means February retail sales fell in real terms. 
• The National Association of Realtors reported that existing home sales fell 7.2% in February and 2.4% from a year ago.  Rising mortgage rates and a shortage of homes were attributed to the decline.
• China reported industrial output in the first two months of the year rose 7.5%, up from 2021’s calendar year’s pace of 4.3%.  
• The Labor Department reported:
  • Producer prices were up 10.0% in February from a year earlier, up from 7.5% year over year in January.
    • For the month of February producer prices rose 0.8%, down from January’s upwardly revised 0.9%.
  • First time claims for unemployment were 214,000, down from the prior week’s revised 229,000. 
  • The 4-week moving average of claims, designed to smooth out volatility, fell to 223,000.
  • Continuing claims fell from 1.49MM to 1.41MM in the week ending March 5^th .  
  • 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 was unchanged at 11.6MM BPD.
  • Natural gas storage fell 79BN cubic feet and is below the 5-year average at this time of year.
• Baker Hughes reported the number of active oil rigs fell 4 to 523.  The number of active natural gas rigs rose 2 to 137.

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

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 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.