Presented by Mark Gallagher
The S&P 500 had its best weekly performance this year as the Federal Reserve (Fed) signaled that rate cuts remain on the horizon for 2024. Bond yields fell on the news as bond investors interpreted this as a signal that inflation headwinds will subside.
Quick Hits
- Report releases: Existing home sales picked up in February.
- Financial market data: The Fed left rates unchanged but signaled that cuts remain likely in 2024.
- Looking ahead: Investors will focus on durable goods orders, consumer confidence, and personal income and spending.
Report Releases—March 18–22, 2024
National Association of Home Builders Housing Market Index: March (Monday) Home builder sentiment improved more than expected, reaching an eight-month high and bringing the index into expansionary territory for the first time this year.
-Expected/prior month sentiment: 48/48
-Actual sentiment: 51
Housing Starts and Building Permits: February (Tuesday)
Housing starts and building permits improved more than expected after experiencing sharp declines
in January.
-Expected/prior month housing starts monthly change: +8.2%/–12.3%
-Actual housing starts monthly change: +10.7%
-Expected/prior month building permits monthly change: +0.5%/–0.3%
-Actual building permits monthly change: +1.9%
Federal Open Market Committee (FOMC) Rate Decision: March (Wednesday)
As expected, the Fed left the federal funds rate unchanged at the conclusion of its March meeting. Fed Chair Jerome Powell reiterated the central bank’s belief that rate cuts are likely this year at his
post-meeting news conference.
-Expected/prior federal funds rate upper limit: 5.5%/5.5%
-Actual federal funds rate upper limit: 5.5%
Existing Home Sales: February (Friday)
Existing home sales grew more than expected in February. The annualized rate of existing home sales now sits at a one-year high.
-Expected/prior month existing home sales change: –3%/+3.1%
-Actual existing home sales change: +9.5%
The Takeaway
-Housing data showed signs of a recovery as the spring season approaches.
-The FOMC continued to signal that interest rate cuts will occur this year.
Financial Market Data
Equity
| Index | Week-to-Date | Month-to-Date | Year-to-Date | 12-Month |
| S&P 500 | 2.31% | 2.81% | 10.12% | 34.65% |
| Nasdaq Composite | 2.86% | 2.15% | 9.63% | 40.49% |
| DJIA | 1.97% | 1.36% | 5.25% | 25.57% |
| MSCI EAFE | 1.21% | 3.15% | 5.64% | 17.78% |
| MSCI Emerging Markets | 0.51% | 2.01% | 1.90% | 9.16% |
| Russell 2000 | 1.61% | 0.96% | 2.52% | 22.34% |
Source: Bloomberg, as of March 22, 2024
The S&P 500 had its best week this year as signals of future rate cuts boosted confidence for equity investors. The potential for rate cuts should reduce the burden on higher-growth businesses that have been facing rising costs of capital with rates at their current levels. Technology, banks, apparel retailers, semiconductors, autos, cruise lines, and home builders were among industries that reacted favorably. Athletic apparel struggled as Lululemon and Nike provided soft guidance.
Fixed Income
| Index | Month-to-Date | Year-to-Date | 12-Month |
| U.S. Broad Market | 0.70% | –1.00% | 1.06% |
| U.S. Treasury | 0.42% | –1.18% | –0.64% |
| U.S. Mortgages | 0.82% | –1.28% | 0.32% |
| Municipal Bond | 0.16% | –0.22% | 3.99% |
Source: Bloomberg, as of March 22, 2024
Treasury yields moved lower as bond investors’ concern around inflation eased after the Fed meeting. The belly of the curve between 2-year and 10-year maturities continued to be the main area of action. The 5-year fell 10 basis points (bps).
The Takeaway
- The S&P 500 had its best week of the year as the Fed indicated rate cuts are on the horizon.
- Yields declined in the belly of the curve because the Fed’s cut signal indicates it believes inflation will ease.
Looking Ahead
This holiday-shortened week will be relatively quiet on the economic data front. That said, investors will still monitor durable goods orders, consumer confidence, and personal income and spending.
- The week kicks off on Monday with the release of new home sales data for February. New home sales are expected to pick up modestly.
- On Tuesday, we expect the preliminary release of the durable goods orders report for February and the Conference Board’s Consumer Confidence Index for March. Headline and core durable goods orders are expected to rebound after falling in January. Consumer confidence is set to rise modestly after dropping more than expected in February.
- Finally, Friday will wrap with personal income and spending data for February. Both are expected to increase. Spending growth has been impressively resilient over the past two years; any further improvement would be a good sign for consumer spending.
Disclosures: This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index. The Bloomberg US Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury’s daily yield curve. The Bloomberg US Mortgage Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Bloomberg US Municipal Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. One basis point is equal to 1/100th of 1 percent, or 0.01 percent.
Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com
Authored by the Investment Research team at Commonwealth Financial Network.
© 2024 Commonwealth Financial Network