March 21, 2025

Worldwide Headlines

1. Tariffs talk remain in control of markets. There was no specific news this week on tariffs, but they are still on the mind of markets. Stocks are staying volatile, and treasury yields have moved noticeably lower (which is important to those that need to finance). The next major news will be April 2 and the announcements of ‘reciprocal tariffs’ on a presumed plethora of companies. More to come on this issue.
2. U.S. national economic activity reports bounce back in February. We got the three key national economic activity reports this week – Housing Starts, Retail Sales and Industrial Production. These reports were from February activity and generally better than expected, so the slowdown in January may have been indeed caused by weather. More to come on the economy as we move forward.
3. Federal Reserve Open Market Committee (FOMC) stays on-hold. However, they did lower their real GDP forecast for this year to +1.7% and raised their inflation expectation to +2.8%. Perhaps what caught the attention of markets was something unexpected. They lower the monthly pace of run-off in their treasury portfolio from $25 billion a month to $5 billion. Essentially, they are now leaving $20 billion a month of cash in the economy, and that is important.

Economic Reports

1. Retail Sales during February came-in at a less than expected rate of +0.2% from the prior month when +0.6% was expected. Seven of the report’s thirteen categories posted decreases, notably motor vehicle sales. Spending at restaurants & bars, the only services sector in the report, declined by the most in a year.
2. NAHB Homebuilder Index for March had a lower-than-expected reading of 39, which is the lowest since last August. “Construction firms are facing added cost pressures from tariffs,” according to NAHB chief economist Robert Deitz, “Data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home”. 3
3. Housing Starts during February were a much better than expected 1.501 million annualized. In addition, Building Permits were 1.456 million annualized. Reports are that the January slowdown was weather-related.
4. Industrial Production Index from February rose +0.7% from the prior month to a reading of 104.2. Inside the report, the Manufacturing component rose +0.9% from a month ago, led by auto production; Utility output slightly declined on the change in weather; Mining increased +2.8%.
5. Weekly Initial Jobless Claims were little changed at 223,000, with Continuing Claims rising to 1.892 million – which is now up from 1.845 million the week of January 31.
6. Leading Economic Index from February fell to a reading of 101.1 (the lowest monthly reading since late 2016) with 5 of the 10 components that make-up the index lower month-over-month.
7. Existing Home Sales in February gained to the 4.26 million annualized rate. The National Association of Realtors says this boost came from a greater supply of homes for sales, better weather and falling mortgage rates. The median sales price is 3.8% higher than a year ago to $398,400 – a record high for February.

Markets this Week (mid-day Friday)

1. U.S. Dollar Index – higher…DXY at 104.118 or +0.11% lower so far this week (1 yr. range = 100.381 to 109.956).
2. Bond yields – lower…2-year Treasury yield declines to 3.94%; 10-year down to 4.23%.
3. Stocks – higher…as of mid-day all five major global stock indexes are higher this week, knowing that the last hour of trading will be dominated by options expiration today.
4. Commodities – higher…5 of 6 sectors in BCOM Index are higher so far this week; only Base Metals are lower

Next Week

1. Economic Reports
   • o S&P Global PMIs, S&P CaseShiller Home Price Index, New Home Sales, Consumer Confidence, Durable Goods Orders, Q4 GDP Revision, Pending Home Sales Index, Personal Income/Spending
     • U.S. consensus QoQ real GDP est.: Q4 = +2.3%, Q1 = +2.1%, Q2 = +1.9%, Q3 = +1.9%, Q4 = +2.0%
     • U.S. consensus YoY inflation est.: Q4 = +2.7%, Q1 = +2.8%, Q2 = +2.7%, Q3 = +3.0%, Q4 = +2.8%
2. Earnings Reports
   • Q1-2025 S&P 500 EPS estimate at the beginning of the period = +6.7%
   • Q1-2025 S&P 500 summary to date: N/A reported; N/A beat estimate; YoY EPS = N/A%
   • S&P 500 YoY EPS estimates: Q4-2024 = +14.3%, Q1-2025 = +6.7%, Q2-2025 = +7.7%, Q3-2025 = +11.9%, Q4-2025 = +11.8%
3. Events
   • Central bank meeting in Mexico and Norway.
   • Congressional Budget Office releases its estimate of when the US Treasury will reach its debt ceiling.