U.S. stock indices ended the week with modest gains, while international developed and emerging markets posted modest losses.  Economic news was generally positive while economic uncertainty remains elevated.

The Federal Reserve met and left its benchmark interest rate unchanged at a range of 4.25% to 4.5%.  The FED is still predicting two quarter point rate cuts by the end of the year but noted that inflation is still running above its 2.0% target.  The FED predicted that inflation would rise from 2.5% to 2.7% during the year.  The FED noted that while employment remains strong, growth is likely to slow to 1.7% in 2025, down from its prior estimate of 2.1%.  Also noted was the uncertainly around economic policy but Chairman Powell indicated the inflation impacts of tariffs likely will be transitory.

The FED did choose to slow the rate of shrinking its balance sheet, known as quantitative tightening, until such time as the debt ceiling is raised.  Instead of allowing $25BN a month worth of Treasuries to mature without replacing them, that will fall to $5BN a month.  The FED chose to keep allowing $35BN worth of mortgage securities to mature without replacement.  Quantitative tightening tends to push up longer term interest rates.

The Bank of Japan met and chose to keep its benchmark rate at 0.5%, which is the lowest among the G7 countries.

Treasury bond yields fell with the 30-year bond yield at 4.590% and the 10-Year note at 4.248%.  Freddie Mac reported that the average 30-year mortgage rate rose to 6.67%.  Crude oil rose to $68.24 a barrel and natural gas fell to $4.021 per MMBTUs.  The U.S. dollar index rose to 104.07 and gold rose to $3020.10 an ounce.

In economic reports last week:

• The National Association of Realtors reported that existing home sales rose a seasonally adjusted 4.2% in the month of February. 
  • From last February, existing home sales were down1.2%.
• The Federal Reserve reported seasonally adjusted industrial production rose 0.7% in February and was up 1.4% from last February.
  • Manufacturing rose 0.9% and was up 0.7% YOY.  The 0.9% gain was the most in a year driven mostly by motor vehicle output.
  • Excluding autos, manufacturing rose 0.3%.
  • Mining, including oil and gas production, rose 2.8% and was flat from last February.
  • Utilities fell 2.5% in the month of February and were up 8.7% from last February.
• The Commerce Department reported:
  • The advanced estimate of retail sales rose a seasonally adjusted 0.2% in February and was up 3.1% from last February.  This is not adjusted for price increases.  This modest increase followed a revised 1.2% decline in January.
    • Motor vehicles and parts fell 0.4% and were up 3.1% from February 2024.

• • Business inventories increased 0.3% in January.

• • Housing starts fell a seasonally adjusted 11.2% from January’s revised level but were down 2.9% from February 2024.
    • Single family starts rose 11.4%.
    • Multi-family starts (5 or more units) rose 12.1% but were down 6.6% year over year.
    • Permits, an indicator of future housing starts fell 1.2% from January’s level.

• The Labor department reported:
  • Seasonally adjusted first-time claims for unemployment were 223,000, a decrease of 2,000 from the previous week’s revised level.  
    • The 4-week moving average of claims, designed to smooth out volatility, was 227,000 an increase of 750 from the previous week’s revised level.
    • For the full unemployment report go here:  https://www.dol.gov/ui/data.pdf .
• The EIA weekly oil report is here: Weekly Petroleum Status Report.  Also, the EIA reported in the prior week:
  • Field production of crude oil fell from 13.575MM BPD to 13.573MM BPD.
  • Natural gas storage fell 9BN cubic feet and was below its average level during the past five years at this time of year.
• Baker Hughes reported the number of oil rigs fell 1 to 486 and the number of natural gas rigs rose 2 to 102.

Please call us if you have any questions.

Loren Rex – Emeritus

Erik A Smith, AIF® – 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. The Dow Jones Industrial Average, Dow Jones, or simply the Dow, is a stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA is one of the oldest and most commonly followed equity indexes. The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange (more than 2500 stocks).

Sources:

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

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

https://www.freddiemac.com/pmms

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

https://bakerhughesrigcount.gcs-web.com/na-rig-count

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

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

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

https://www.fiscal.treasury.gov/reports-statements/mts/current.html