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WEEKLY MARKET ROUND-UP Thru Mar 3rd 2023: “How High Will Rates Go?”

Hey Folks lately the markets have been chopping up and down as investors try to determine just how high the Feds will raise rates. All of this of course is based upon future projections of where inflation will land. AS we move forward in time a number of pundits are sticking to the higher for longer inflation rate theme while others are convinced inflation will fall dramatically over the next 6 months. Depending upon who is right will drive the US Indexes a good deal. Get my take in this week’s update.


US indexes ended higher and regained some ground following their worst weekly decline in two months. A lack of notable catalysts seemed to result in low market volumes throughout much of the week. Sentiment also appeared to gain support from the S&P 500 Index staying above its 200-day moving average.

Durable goods orders posted their steepest decline since the height of the pandemic-related shutdowns in April 2020. Similarly, wholesale inventories fell for the first time since July 2020, but retail inventories (excluding autos) rose slightly. The ISM ticked higher in February for the first time since May, although it remained in contraction territory at 47.7 while the Services PMI fell slightly to 55.1 but less than consensus expectations. The week’s biggest data surprise may have been an 8.1% jump in pending home sales in January, marking the second month of gains.

Comments from Atlanta Fed President Bostic appeared to help spark a modest rally when he stated he still supported only a 25-bps rate hike at the Fed’s upcoming Mar 22nd policy meeting despite the previous week’s hot inflation data. He also stated that the “Fed could be in position to pause by mid to late summer. The 10-Year U.S. Treasury note pull back from a new three-month intraday high of 4.09% and end the week slightly below 4%. Fed Fund Futures is pricing in a terminal rate of 5.35% mid-summer which is over 87 bps from the December forecast. If the Feds price in a 25 bps hike on Mar 22nd then the current rate moves to 4.75% – 5.00%

Shares in Europe rose as markets overcame worries about interest rates and focused on signs of an improving economic outlook. Inflation in the eurozone eased to an annual rate of 8.5% in February compared with 8.6% in January, mainly due to falling energy costs, official data showed. However, core inflation, which excludes volatile food and energy costs and therefore provides a clearer picture of underlying pricing pressures, ticked up to 5.6% from 5.3%. The eurozone unemployment rate in January held steady at 6.7%, close to record lows. Meanwhile, the Bank of England Governor Andrew Bailey warned that policymakers may still have to raise interest rates above 4% but that another hike is not inevitable.

In Japan Kazuo Ueda, expected to succeed BoJ Governor Haruhiko Kuroda on April 9, reiterated the need to maintain accommodative monetary policy. Although core consumer price inflation in the Tokyo area slowed in February to 3.3% year on year from an over 41-year high of 4.3% in January, due largely to government energy subsidies on household electricity bills, inflation exceeded the BoJ’s 2% target for the ninth straight month.

Chinese stocks rose for the second week ahead of the National People’s Congress (NPC) meeting as strong economic data raised prospects for a better-than-expected recovery. China’s official manufacturing PMI data rose to 52.6 in February from January’s 50.1, marking the highest reading since April 2012 as domestic activity picked up. And the nonmanufacturing PMI rose to 56.3 from 54.4 the previous month. And in the troubled property sector we saw new home sales at China’s top 100 developers rising by 14.9% following a 19-month slump as demand recovered after the government lifted its zero-COVID policy.

Enjoy this Week’s Round-Up

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