Weekly Economic Update – March 26, 2018

TRADE WAR POSSIBILITY WEIGHS ON STOCKS
Last week, the U.S. imposed excise taxes on steel and aluminum imported from select countries and announced that up to $60 billion of Chinese imports would also soon face tariffs. These protectionist moves weakened bullish sentiment on Wall Street. The S&P 500 fell steadily Thursday and Friday and had its worst week since 2016, slipping 5.95% to 2,588.26; the Dow Industrials sank 5.67% on the week to 23,533.20. The Nasdaq Composite settled at 6,992.67, down 6.54% for the week.^1,2

FED MAKES ITS FIRST INTEREST RATE MOVE OF 2018
After Federal Reserve officials voted to increase the target range on the federal funds rate by 0.25% to the 1.50-1.75% level Thursday, their dot-plot forecast showed no change in the pace of tightening planned for this year. Three hikes are projected for 2019 and two more in 2020. In succession, the increases envisioned for 2018-20 could leave rates near 3.4% by the final quarter of 2020.³

EXISTING HOME SALES INCREASE
New National Association of Realtors data shows that the sales pace improved 3.0% in February. That left resales 1.1% higher, year-over-year. The same cannot be said for new home purchases: they fell 0.6% last month according to the Census Bureau, leaving the seasonally adjusted annual sales rate at its weakest level since October.^4,5

MEANWHILE, OIL SURGES
WTI crude staged a major rally last week, jumping up 5.6% to close Friday at $65.74 a barrel on the NYMEX. With equities under pressure, gold also gained more allure: prices rose 0.8% across five days to $1,352.90 on the COMEX.^2,6

THIS WEEK: Monday, Paychex and Red Hat report earnings. On Tuesday, the Conference Board presents its March consumer confidence index; the Street also considers earnings from Lululemon Athletica, Restoration Hardware, Shoe Carnival, and Sonic. Wednesday, investors await the third Q4 GDP estimate, the February pending home sales index from the NAR, and earnings announcements from Blackberry, GameStop, Hudson’s Bay Co., and Walgreens Boots Alliance. February personal spending numbers, the final March University of Michigan consumer sentiment index, and Q4 results from Constellation Brands appear Thursday. Nothing major is scheduled for Friday.

% CHANGE	Y-T-D	1-YR CHG	5-YR AVG	10-YR AVG
DJIA	-4.80	+13.93	+12.43	+8.75
NASDAQ	+1.29	+20.20	+23.10	+20.05
S&P 500	-3.19	+10.33	+13.25	+9.17
REAL YIELD	3/23 RATE	1 YR AGO	5 YRS AGO	10 YRS AGO
10 YR TIPS	0.75%	0.46%	-0.60%	1.24%

Sources: wsj.com, bigcharts.com, treasury.gov – 3/23/18^1,2,7,8,9
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

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Citations.
1 – nytimes.com/2018/03/23/business/trade-tariffs-markets-stocks-bonds.html [3/23/18]
2 – markets.wsj.com/us [3/23/18]
3 – marketwatch.com/story/fed-lifts-rates-in-powells-first-meeting-says-outlook-has-strengthened-2018-03-21 [3/21/18]
4 – tradingeconomics.com/united-states/existing-home-sales [3/23/18]
5 – tradingeconomics.com/united-states/new-home-sales [3/23/18]
6 – quotes.wsj.com/futures/CRUDE%20OIL%20-%20ELECTRONIC [3/23/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F23%2F17&x=0&y=0 [3/23/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F23%2F17&x=0&y=0 [3/23/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F23%2F17&x=0&y=0 [3/23/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F22%2F13&x=0&y=0 [3/23/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F22%2F13&x=0&y=0 [3/23/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F22%2F13&x=0&y=0 [3/23/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=3%2F24%2F08&x=0&y=0 [3/23/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=3%2F24%2F08&x=0&y=0 [3/23/18]
7 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=3%2F24%2F08&x=0&y=0 [3/23/18]
8 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [3/23/18]
9 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [3/23/18]