Existing home sales unexpectedly slipped by 3.2% in January to an annualized rate of 5.38 million, as tight supply, affordability and rising mortgage rates sidelined potential homebuyers.
Mortgage purchase applications saw a 6% slump in the week ending February 16, as mortgage rates hit the highest level in over four years. Refinancing activity (which is sensitive to even small rate changes) dropped by 7% in the same period.
Minutes from the Federal Open Market Committee’s (FOMC) January meeting (which was Janet Yellen’s final as Federal Reserve Chair) revealed that a majority of its members foresee a continuation of strong economic growth, and that almost all members believe inflation will trend toward the central bank’s 2% target in the near-term.
A preliminary reading of Markit’s February purchasing managers’ index (PMI) pointed to accelerating growth. Services came in above expectations, due to strength in new work and business confidence; manufacturing hit a 40-month peak, driven by new-business and payroll growth. The report also indicated swelling cost pressure that supports the case for additional interest-rate increases this year.
Initial jobless claims shrank by a greater-than-expected 7,000 to 222,000 in the week ending February 17, as labor-market conditions continued to tighten. The less-volatile four-week moving average cooled by 2,250 to 226,000. Continuing claims remained near a 45-year low, falling by 73,000 to 1.88 million in the week ending February 10.
The Conference Board’s index of leading economic indicators expanded for the third straight month, with a better-than-expected 1.0% gain in January, supported by strength in equity prices and building permits. It was also boosted by the Institute for Supply Management’s new orders index (which is used by economists to gauge the health of the U.S. economy), as its January results pointed to continued economic acceleration and strength.
Economic growth in the eurozone slowed in February from a12-year high in the previous month, according to preliminary data from the composite PMI, with services and manufacturing both decelerating. Analysts nevertheless suggested that the rate of expansion remained impressive.
The U.K. economy grew by a revised 0.4% during the fourth quarter and by 1.4% year over year, making it the slowest-growing major economy in 2017, handicapped by Brexit-related concerns. Household spending and gross fixed-capital formation gained, while net trade detracted.
Japanese manufacturing expanded for the eighteenth consecutive month in February, but lagged January’s four-year high. Output and new orders slowed as a stronger yen weighed on external demand.
U.S. Economic Calendar
February 26: New-Home Sales
February 27: Durable Goods Orders, International Trade, S&P Corelogic Case-Shiller Home Prices
February 28: Mortgage Applications, GDP
March 1: Jobless Claims, Personal Income and Outlays, PMI Manufacturing Index, Construction Spending
- March 2: Consumer Sentiment
- Global equity markets declined this week. Emerging markets were slightly higher, and developed markets fell.
- U.S. equity sector performance was mostly positive. Information technology and materials were up, while telecommunications and consumer staples were lower. Growth stocks outpaced value stocks, large-company stocks beat small-company stocks.
- Global bond markets moved lower this week. High-yield bonds outperformed, while global corporate and global government bonds lagged.
- Treasury yields rose and the 10-year yield hit a new four-year high as traders digested the January FOMC meeting minutes.
This information is not meant as a guide to investing, or as a source of specific investment recommendations, and Gibraltar Private Bank & Trust makes no implied or express recommendations concerning the manner in which any client’s accounts should or would be handled, as appropriate investment decisions depend upon the client’s investment objectives. The information is general in nature and is not intended to be, and should not be construed as, legal or tax advice. In addition, the information is subject to change and, although based upon information that Gibraltar Private Bank & Trust considers reliable, is not guaranteed as to accuracy or completeness. Gibraltar Private Bank & Trust makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, the information.
Investment Product: Not FDIC Insured • No Bank Guarantee • May Lose Value • Not a Deposit • Not Insured by Any Federal Government Entity
Index returns are for illustrative purposes only and do not represent actual fund performance.
Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.
This material is provided by SEI Investments Management Corporation (SIMC) for educational purposes only and is not meant to be investment advice. The reader should consult with his/her financial advisor for more information. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. There are risks involved with investing, including possible loss of principal. SIMC is a wholly owned subsidiary of SEI Investments Company.