Rover’s Weekly Market Brief — 3/23/2018

Economy

Noting that job gains have been strong in recent months and that economic activity has been rising at a moderate pace, the Federal Reserve Open Market Committee (FOMC) voted unanimously to raise the prime interest rate ^[6] 0.25% to 1.5% – 1.75%, despite that fact that yearly inflation remains below their 2% target rate. The FOMC also updated their near term economic projections ^[7] to show increases in expected GDP for 2018 (+0.2% to 2.7%) and 2019 (+0.3% to 2.4%), with longer run GDP unchanged at 1.8%. The unemployment rate was expected to drop further, with projections for 2020 down -0.4% to 3.6% and eventual stabilizing at a new longer run rate of 4.5% (-0.1%). Core PCE inflation expectations were increased +0.1% to 2.1% in 2019 and 2020, but overall PCE inflation was projected to remain at 2.0% over the longer run. Based on these projections, the FOMC forecast rate increases to 2.1% in 2018, 2.9% (+0.2%) in 2019, and 3.4% (+0.3%) in 2020, stabilizing at 2.9% (+0.1%) in the longer run.

New home sales ^[8] were revised significantly upward for January by 29,000 to a seasonally adjusted annual rate (SAAR) of 622,000, with February’s sales falling only slightly behind at 618,000, up +0.5% from February 2017. The median sales price was $326,800, up 9.7% Y/Y, and the supply of houses on the market rose from 5.8 months to 5.9 months. Home sales rose +19.4% in the Northeast (+6,000, SAAR) and +9.0% in the South (+28,000 SAAR), but fell -3.7% in the Midwest (-3,000 SAAR) and -17.6% in the West (-35,000 SAAR). Sales of homes that had not yet been started jumped +24.6%, while sales fell for homes under construction (-6.7%) and completed homes (-10.4%).

Durable goods orders ^[9] jumped +3.1% for February, after January’s upwardly revised -3.5% drop. The increase was led by a +7.1% increase in orders for transportation equipment, with automobile orders up +1.6%, a +25.5% increase in nondefense aircraft orders (vs -27.9% drop in January), and a +37.7% increase for defense aircraft orders (vs -48.9% drop in January). Stripping out transportation, orders were up +1.2%, with increases for primary metals (+2.7%), electrical equipment and appliances (+2.6%), and machinery (+1.6%), while orders fell for computers and electronic products (-0.2%). On a yearly basis, overall orders were up 9.1%, orders excluding transportation were up 8.5%, and orders rose in all categories except computers (-7.0%), and communications equipment (-4.5%).

Upcoming Economic Reports:

Wednesday March 28 – GDP, 2017 Q4 Final Revision

Thursday March 29 – Personal Income and Outlays

Earnings Calendar:

 

Monday	Tuesday	Wednesday	Thursday	Friday
Red Hat (RHT) [10]	Merck (MKGAF) [11]	Tencent Holdings (TCEHY) [12]	Constellation Brands (STZ) [13]	Bank of China (BACHY) [14]
Paychex (PAYX) [15]	Michelin (MGDDY) [16]	CK Hutchinson Holdings (CKHUY) [17]	Science Applications International (SAIC) [18]	Contura Energy (CNTE) [19]