By CCM Capital Markets
Markets have eased up this morning, following yesterday’s Fed announcement which sparked bullish sentiment in afternoon trade on Wednesday. Investors continue to analyze the Fed’s relatively dovish statement, while digesting today’s economic data reports.
FOMC Interest Rate Decision
In yesterday’s activity, nine of the Federal Reserve committee members voted on raising interest rates by 25 basis points (Kashkari dissented). Markets had priced in the expected rate hike; however, market participants reacted to a surprisingly dovish statement which signaled to an unchanged dot plot for 2017 and 2018. Market reaction helped bond markets rally as traders were anticipating a more aggressive tone from the Fed on tightening policy.
In their statement, the Fed also noted that core inflation remained “somewhat below” the Fed’s “symmetric” 2% target. Fed Chair Yellen confirmed that the economy is doing well in her press conference. She further stated that the Fed’s decision to hike rates was directly related to the economy’s continued progress and not a change in the Fed’s economic outlook.
Today’s economic calendar kicked off with housing starts for February, which were somewhat favorable within the details. At the headline level, results were mixed as housing starts beat estimates by posting a 1.288 million annualized rate while permits fell below the consensus at a 1.213 million rate. However, single-family permits were quite favorable, rising by 3.1% on the month to an 832k rate. Multi-family unit permits offset most of the single-family gains, as permits for multi-family properties fell 22% to 381k. Single-family home starts were also solid and posted a 6.5% increase to an 872k rate; however, multi-family starts fell 3.7% to 416k.
In labor market news, jobless claims continue to trend lower, signaling continued strength for the sector. Initial claims, in the March 11 week, were down 2k to 241k, with the 4-week average little changed at 237.25k. Continuing claims, in lagging data for March 4 week, were also down a sizeable 30k.
Also in jobs data, the JOLTS report releases this morning saw a solid 5.626 million figure in job openings for January. Hiring activity increased by 2.6% to 5.440 million and is one of the best readings of the economic cycle. Improved confidence among workers received a boost as the quits rate rose by one tenth to 2.2%, while the layoff rate held unchanged at 1.1%. Details of the report point to a narrowing in the gap between openings and hiring, which could eventually result in possible wage inflation, assuming that employers would be obliged to make better offers to hire new recruits.
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