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Weekly Update – March 23, 2018

  • Stock markets around the globe took a hard tumble for the week, their worst decline since the early February rout. Despite a reassuringly predictable FOMC meeting, White House threats of a trade war spooked investors. Gold and oil prices both rose for the week. The yield on the ten-year U.S. Treasury note fell slightly, to about 2.84%.

  • U.S. stocks sold off early in the week as investors took profits in technology shares. It got worse after the Trump administration announced tariffs on a range of Chinese imports, amounting to tens of billions of dollars of goods, in addition to the duties on steel and aluminum. In response, China announced tariffs on about three billion of U.S. goods.

  • Existing home sales beat expectations for February, though the housing market continued to tighten. Coming in at 5.5 million, the National Association of Realtors’ existing home sales ended two consecutive months of declines and beat consensus estimates of 5.4 million. By contrast, new home sales fell slightly.

  • The mood among German investors worsened in March. The ZEW survey of German economic sentiment fell to 5.1 this month from 17.8 in February, versus a consensus forecast for 13.1. A different gauge of investor perceptions of current economic conditions fell to 90.7 from 92.3 last month, versus expectations of 90.0.

  • The Commerce Department said February orders for durable goods — products designed to last at least three years — increased 3.1% over January to $247.72 billion, the fastest increase in eight months and the largest gain since mid-2017. 

  • The Federal Reserve increased its baseline interest rate by 25 basis points (bp) as expected. The bigger questions surrounded the evolution of the Fed’s Summary of Economic Projections or “dot plot,” which had been signaling three rate hikes in 2018, and might move up to four. The SEP maintained a projection of three rate hikes for 2018, though the median 2019 dot went from two to three rate hikes. The long-run dot also drifted slightly higher. The median core PCE inflation projection was unchanged at 1.9%. No change in balance of risks, though noted economic outlook has strengthened.

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