Markets rebound as investors weigh the Fed meeting outcome

Dow went up 132, advancers over decliners 5-4 & NAZ advanced 258.  The MLP index added 1 to the 279s & the REIT index crawled up to the 379s.  Junk bond funds were mixed & Treasuries had a little selling, raising yields (more below).  Oil rose in the 81s & gold inched up 1 to 2163.

AMJ (Alerian MLP Index tracking fund)

US homebuilders are feeling more confident about their businesses than they have since last summer, as they see better demand despite stubbornly high mortgage rates.  Homebuilder sentiment rose 3 points in Mar to 51 on the National Association of Home Builders/Wells Fargo Housing Market Index.  The reading gained for the 4th straight month, hitting its highest level since Jul.  Sentiment also moved intopositive territory for the first time since Jul.  50 is the line between positive & negative sentiment.  Mortgage rates came down in the first week of Mar, only to shoot back up in the 2nd week.  The average rate on the popular 30-year fixed mortgage has hovered around 7% since early Feb.  “Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year,” said NAHB Chair Carl Harris.  “But even though there is strong pent-up demand, builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, and new restrictive codes that continue to increase the cost of building homes.”  Of the index's 3 components, current sales conditions rose 4 points to 56, expectations in the next 6 months rose 2 points to 62 & buyer traffic increased 2 points to 34.  The report also noted that fewer builders are lowering home prices to attract buyers.  In Mar, 24% of builders reported cutting home prices, down from 36% in Dec 2023, the lowest share since Jul.

Homebuilder sentiment turns positive for the first time since July

US wage growth has slowed sharply over the past year & is getting closer to returning to its pre-pandemic level, according to new data from career site Indeed.  The wage tracker, based on salaries for job advertisements listed on Indeed, showed that salaries were up 3.3% in Feb compared with the same time one year ago.  That is a marked drop from Jan 2022, when wages were up about 9.3%, suggesting that employers are facing less competition for new hires.  "The pace of deceleration is striking," wrote Indeed labor economist Nick Bunker.  "Posted wage growth has fallen by almost 3 percentage points over the past year."  While the deceleration is broad-based, it is most pronounced in low-wage sectors.  Posted pay for that group tumbled to 3.4% in Feb from 12.5% at the start of 2022.  "Given the huge run-up in posted wages for those sectors, wage growth is still above its pre-pandemic pace," Bunker added.  "How long this will last is uncertain."  By comparison, wage growth for high-wage employees dropped from a high of 8.2% to 2.6% in Feb.  For middle-wage workers, year-over-year growth has fallen to 3.9% from a peak of 8.5%.  The labor market has remained historically tight over the past year, defying expectations for a slowdown.  Economists anticipate the labor market will continue to slow in the coming months as higher interest rates work their way thru the economy.

Americans are struggling to put more money in their pocket as earnings drop

Treasury yields were little changed as investors looked ahead to the Federal Reserve's Mar meeting, which could provide clues about the outlook for interest rates.  The yield on the 10-year Treasury was unchanged & the 2-year Treasury yield was 1 basis point lower at 4.71%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  The Fed is due to meet tomorrow & Wed & will announce its latest interest rate decision & monetary policy guidance at the end of its meeting.  Markets are widely expecting the central bank to leave interest rates unchanged.  However, investors are hoping that the central bank will provide clues about its expectations for monetary policy, including when rates may be cut & how many rate cuts will likely take place this year.  This comes after recent inflation data for Feb came in slightly higher than expected, indicating that pressures from rising prices remain persistent.  Fed policymakers have previously said that their decision-making regarding interest rates would be data-dependent & that they were still looking for more evidence that inflation is easing.  Traders were last pricing in a roughly 58% chance of rates being cut in June, slightly lower than earlier in the month, according to CME Group's FedWatch tool.

Treasury yields are little changed as investors look to Fed meeting

Tech stocks on NAZ are popular today on hopes for more good news for AI companies.  However in the broader market, advancers are only modestly ahead of decliners.  The outcome from the Fed meeting will steer market behavior.

Dow Jones Industrials