Your Weekly Update for Monday, March 11, 2024.
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Mike Elerath
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CERTIFIED IN LONG-TERM CARE
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Bill Roller
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CHARTERED FINANCIAL ANALYST
CERTIFIED FINANCIAL PLANNERTM
CHARTERED MARKET TECHNICIAN
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Summary
Markets were DOWN last week. The Dow Jones Industrial Average FELL 0.93% to 38,722.69 while the S&P500 ended down 0.26% to 5,123.69. The Nasdaq Composite fell 1.17% to 16,085.11. The annual yield on the 30-year Treasury fell 6.4 basis point(s) to 4.262%.
Economic data during the week included the ISM services falling back a bit but remained in expansion. The employment situation report was mixed, with decent February growth offset by prior month revisions.
Equities fell back in the U.S., saw decent performance abroad. Bonds gained as yields fell across the curve. Commodities were mixed, with a drop in energy and a rise in metals.
Economic Notes
(+/0) The ISM Services/Non-Manufacturing Index for February fell by -0.8 of a point to 52.6, compared to expectations of a less dramatic drop to 53.0. Importantly, leading indicators of new orders and business activity both improved further into expansion at 56-57. On the negative side, employment fell by several points back slightly into contraction, as did supplier deliveries. Prices paid also fell by over -5 points but remained strongly in contraction at near 59—kept buoyant by strong wage costs. Overall, the services index remains in expansion, seen by positive results in 14 of the 18 industries reporting. Although the trend is slowing, that erosion seems to be very gradual.
(0) Initial jobless claims for the Mar. 2 ending week were unchanged at 217k, just a tick above the 216k level forecast. Continuing claims for the Feb. 24 week rose by 8k to 1.906 mil., above the 1.880 mil. expected. This again showed little net change, with no extreme numbers among the states, pointing to no red flags of any unexpected layoff activity.
(0) JOLTs government job openings fell by -26k in January to 8.863 mil., but above the median forecast of 8.850 mil. Openings rose the most in leisure/hospitality (97k), ‘other’ services (64k), and financial activities (57k), while declines were most notable in trade/transports/utilities (-267k, over half of which were in retail trade, which likely features some degree of seasonal effect), government (-105k), and construction (-21k). The job openings rate was unchanged at 5.3%, while the hiring rate fell a tenth to 3.6%; on the departure side, the layoff rate was flat at 1.0%, while the quits rate fell a tenth to 2.1%. This pointed to some tempering in the pace of labor markets, but not a radical change. The current opening levels are down from the peak post-Covid rebound, but remain well above where they were before 2020, with openings levels falling at over 1.4x the U-3 level of unemployment.
(+) The employment situation report for February came in better than expected, with some gains apparently boosted by weather effects. Nonfarm payrolls rose by 275k, outpacing the 200k expected, as well as the 229k from January. However, the two prior months were revised downward by -167k, reducing the apparent strength of the year so far. By segment in Feb., gains were led by health care (67k), government (52k, mostly in local, including education), food services (42k), social assistance (24k), construction (23k), transportation/warehousing (20k), and retail (16k). Only a handful of sectors experienced minor job declines, including temporary employment (-15k), which tends to be on the transitional side of the job market.
The unemployment rate ticked up by 0.2% to 3.9%, versus expectations for no change, with a -184k decline in household employment. The U-6 underemployment rate ticked up a tenth to 7.3%. For those reviewing employment-to-economy rules of thumb, current unemployment remains above the 12-month moving average, but the highly-correlated-to-recession ‘Sahm Rule’ has not yet been triggered.
Average hourly earnings rose 0.1%, underperforming the 0.2% median forecast, and decelerating from the sharp pace of the prior month. Year-over-year, earnings decelerated a tenth of a percent to a 4.4% rate. The average workweek length ticked up by 0.1 to 34.3 hours. Earlier in the week, revised nonfarm productivity for Q4 came in unchanged at a still-robust 3.2% annualized rate. Year-over-year, productivity was revised down a tenth to a pace of 2.6%. Unit labor costs in Q4 were revised down a tenth to 0.4%, despite expectations of a sharp revision higher, with the year-over-year rate being revised up a tenth to 2.4%.
(+/0) The Fed Beige Book, which covers economic conditions in the various Fed districts, over the period of mid-January through the end of February, eight districts reported slight to modest growth in activity, and one (Phila.) reported a slight softening. Notably, consumer spending (esp. in retail goods) has ticked down, with continued high sensitivity to elevated prices, resulting from past inflation. On the other hand, demand for air travel remained robust, while restaurant/hotel spending fell a bit, although winter seasonality played a role. Interestingly, on the manufacturing and transportation side, supply chain constraints continued to ease, with the Red Sea disruptions not making a significant dent thus far. Residential real estate remained balanced, with demand being helped whenever mortgage rates fall back, but overall conditions continue to be driven by overly low inventories. Commercial real estate was mixed as well, with office staying weak, while segments like data centers, industrial, and infrastructure continue to see robust demand. Labor markets remain strong, with some employers finding it a bit easier to find applications, except in high-skill trades, where struggles persist. On the inflation side, high price pressures continued, although the pace of inflation seemed to moderate. Overall, this anecdotal narrative largely told the same story as other data reports—that the economy continues to grow, although there are divergences by sector.
Market Notes
| Period ending 3/8/2024 | 1 Week % | YTD % |
| DJIA | -0.85 | 3.21 |
| S&P 500 | -0.23 | 7.73 |
| NASDAQ | -1.15 | 7.31 |
| Russell 2000 | 0.34 | 2.97 |
| MSCI-EAFE | 2.47 | 5.78 |
| MSCI-EM | 1.24 | 1.51 |
| Bloomberg U.S. Aggregate | 0.81 | -0.50 |
| U.S. Treasury Yields | 3 Mo. | 2 Yr. | 5 Yr. | 10 Yr. | 30 Yr. |
| 12/31/2023 | 5.40 | 4.23 | 3.84 | 3.88 | 4.03 |
| 3/1/2024 | 5.42 | 4.54 | 4.17 | 4.19 | 4.33 |
| 3/8/2024 | 5.46 | 4.48 | 4.06 | 4.09 | 4.26 |
U.S. stock sentiment was seemingly again driven by the back-and-forth of whether Federal Reserve rate cuts would be coming sooner rather than later. Fed Chair Powell’s testimony to Congress last week included that the short-term rate was ‘likely at its peak for this tightening cycle,’ with dialing back policy restraint this year, while also noting the risks of reducing interest rates too soon, as evidence showed the economy is growing, not moving towards recession. At the same time, greater confidence is still needed that inflation has been beaten, although they’re ‘not far’ from that place. This was taken by markets as another sign of around June as the starting point for policy easing, based on action seen in Fed funds futures markets.
President Biden’s State of the Union speech Thurs. evening noted several initiatives, and higher taxes, but did not appear to move the needle too much from a financial market sentiment standpoint. Expiring 2017 tax cuts are already partially implied as a base case, yet Congressional approval in both houses would be required for anything additional in coming years.
By sector, utilities saw the strongest gains of 3%, followed by materials and energy; on the downside, consumer discretionary stocks fell by over -2%, with declines of a percent in technology as well. Weakness in Tesla drove the former, and Apple the latter, with both apparently somewhat in response to slowing sales in China.
In a back corner of the financial sector, New York Community Bank experienced another bout of downside volatility, with concerns over specific commercial real estate exposure. This brought back reminders of general bank stress a year ago, albeit from losses in treasury bond holdings that threatened solvency in several cases, until the potential crisis was averted.
After much wrangling and some paring back, the SEC has also adopted new rules requiring many publicly traded firms to report on climate-based risks in financial statements. This initiative has been controversial to say the least, with the scope broken out into two parts: direct climate impact from company operations, and secondly, from a company’s energy usage. It is unclear from the outset what type of additional compliance burden this will impose on companies (as with Dodd-Frank in 2010, the burden from which ended up being quite heavy on firms in the financial sector).
Foreign stocks outpaced U.S. on the week, with gains of over a percent in all developed regions. In Europe, the ECB kept policy rates unchanged, but hinted at ‘good progress’ being made on reaching their inflation target perhaps up to a year earlier than expected (2025). As with the U.S., this pointed to mid-year as a possible jumping-off point for cuts, although some economists now see Europe potentially leading the way (contrary to normal) due to weaker economic conditions. Emerging market stocks were mixed, with gains on net, although lower than in the developed world. The Chinese National People’s Congress met last week, setting their economic growth target to 5%. Due to weakness as of late, some investors took this as a subtle message that more stimulus is on the way—which has provided a positive influence on stocks.
Bonds saw gains with interest rates declining along with Chair Powell’s comments to Congress, with similar returns for U.S. Treasuries and investment-grade corporates. Both outperformed high yield and floating rate loans as spreads widened. Foreign bonds fared positively along with a sharp drop of about a percent in the U.S. dollar.
Commodities were mixed for the week, as declines in energy were offset by gains in metals, especially precious metals, as hopes of lower rates buoyed prices. Crude oil fell nearly -3% last week to $78/barrel, despite an extension of OPEC+ production cuts, intended to keep prices stable/higher. Since the Russian invasion of Ukraine and a brief spike in early 2022, oil prices have traded in a relatively tight range of $70-90 over most of the past two years, with offsetting supply and demand influences.
Mortgage Rates
“Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates,” said Sam Khater, Freddie Mac’s Chief Economist. “Mortgage rates continue to be one of the biggest hurdles for potential homebuyers looking to enter the market. It’s important to remember that rates can vary widely between mortgage lenders so shopping around is essential.”
The 30-year FRM averaged 6.88 percent as of March 7, 2024, down from last week when it averaged 6.94 percent. A year ago at this time, the 30-year FRM averaged 6.73 percent.
The 15-year FRM averaged 6.22 percent, down from last week when it averaged 6.26 percent. A year ago at this time, the 15-year FRM averaged 5.95 percent.
Freddie Mac’s Primary Mortgage Market Survey® is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Borrowers may still pay closing costs which are not included in the survey.
Through our relationship with Mortgage Window, Inc. (NMLS#2485156) in Vancouver, Washington we originate residential and reverse mortgages.
Selected Cryptocurrencies
| Symbol | Name | Price | 24h % | 7d % | Market Cap | Volume(24h) |
| BTC | Bitcoin | 72129.25 | 3.25% | 10.81% | $1,417,533,306,966 | $52,154,314,758 |
| ETH | Ethereum | 4059.52 | 3.12% | 15.77% | $487,597,072,526 | $25,548,109,693 |
| BNB | BNB | 524.66 | -1.59% | 25.20% | $78,458,165,002 | $4,556,899,257 |
| SOL | Solana | 149.74 | 3.18% | 12.56% | $66,405,762,498 | $4,922,563,739 |
| XRP | XRP | 0.6275 | 1.97% | -4.19% | $34,357,613,072 | $2,223,646,273 |
| ADA | Cardano | 0.7412 | 2.07% | -4.96% | $26,358,352,742 | $900,587,916 |
| DOGE | Dogecoin | 0.1774 | 3.36% | 10.41% | $25,448,651,614 | $2,580,370,906 |
| SHIB | Shiba Inu | 0.00003421 | 2.53% | 30.02% | $20,163,092,718 | $2,438,887,498 |
| AVAX | Avalanche | 47.13 | 11.04% | 7.80% | $17,779,943,143 | $1,012,699,083 |
| DOT | Polkadot | 10.76 | 4.08% | 6.64% | $13,869,931,211 | $544,447,377 |
| LINK | Chainlink | 21.55 | 8.46% | 4.96% | $12,661,972,162 | $1,365,560,817 |
| MATIC | Polygon | 1.22 | 0.12% | 10.32% | $12,099,005,490 | $997,048,124 |
| TRX | TRON | 0.1333 | -1.81% | -5.60% | $11,723,456,776 | $420,835,988 |
| TON | Toncoin | 2.89 | 2.38% | 5.75% | $10,039,138,316 | $81,434,204 |
| BCH | Bitcoin Cash | 444.1 | 2.71% | -2.67% | $8,733,451,737 | $711,969,801 |
| UNI | Uniswap | 14.39 | 2.97% | 12.57% | $8,614,402,573 | $314,371,588 |
| NEAR | NEAR Protocol | 6.89 | 15.64% | 50.16% | $7,189,265,629 | $1,082,928,214 |
| LTC | Litecoin | 95.62 | 8.60% | 5.82% | $7,104,462,758 | $806,679,534 |
Information current as of 5:40 AM PDT, Monday, March 11, 2024. Source: https://coinmarketcap.com
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Sources: Ryan Long, CFA, FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, MarketfieldAsset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, PIMCO, Standard & Poor’s, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. FocusPoint Solutions, Inc. is a registered investment advisor.
Notes key: (+) positive/encouraging development, (0) neutral/inconclusive/no net effect, (-) negative/discouraging development.