Stocks In Steady Retreat Despite Upbeat Data
There is a sense about the financial markets at the moment of a collective time-out, suggested not just by a second successive day of the stock market trading within a limited range but also by the lack of direction: the Dow Jones has produced no net movement in the course of the last month.
Tuesday, March 24, 2015 - 00:00
The index closed at 18,116.84 on February 23 and at 18,116.04 on March 23. There’s nothing wrong with the markets taking a breather, and it is understandable when economic news has not been providing a clear enough steer on how the Fed might be leaning.
Today’s macro data was mostly encouraging, but not so encouraging to cause any kind of rethink of when to expect a rate hike. Inflation has been low enough in recent months to be a concern, but there was a slight pick-up in February. The Consumer Price Index rose 0.2%, in line with expectations, following January’s 0.7% dip. Despite February’s month-on-month rise, inflation remains very tame, with the year-on-year change at -0.1%. At the core level, which excludes food and energy prices, the month-on-month story is no different at 0.2%, but tells a different story year-on-year at 1.7%. With the Fed statement indicating a rate rise is unlikely at the April FOMC meeting, there’s certainly nothing in this report to alter that outlook.
Manufacturing data has pointed to a rough patch for the sector at the start of the year, but the flash reading of the PMI manufacturing index, released this morning, hints a corner may have been turned, increasing to a better-than-expected 55.3 in March, from 54.3 at mid-month in February. This is the best level seen in five months, and encouragingly the forward-looking new orders component of the index has also reached a five-month high. Some of the gloss is taken away by the ongoing weakness in export sales, an area of the economy that the Fed has highlighted as holding back overall growth.
Housing looks to have had a good time in February. We saw data yesterday showing a bounce back in existing home sales and today’s report on new home sales was even more positive. New home sales jumped to an annualized pace of 539,000 in February, while January was revised up sharply from 481,000 to 500,000. With supply already looking thin, this will raise hopes that it will act as a spur to construction and sets the housing sector up nicely for the key spring season.
By mid-afternoon in New York, the Dow Jones was down 84 points or 0.47% at 18,031, and the S&P 500 index was down the same percentage at 2094.1. In the forex market, the day’s mainly positive economic news helped the dollar to claw back some of its recent losses. GBP/USD fell 0.68% to 1.4853, while the euro slid 0.18% against the dollar to 1.0926.