I hope you are all doing well. The S&P 500 and the NASDAQ both rose around 2.0% for the week while the Dow posted a 0.3% gain. Although those results fell far short of the NASDAQ’s 8.2% surge in the previous week, they marked the second positive week in a row for stocks despite growing expectations of steep interest-rate increases ahead. The rout in bonds continued. The sharp year-to-date decline in bond prices accelerated, sending the yield of the 10-year U.S. Treasury bond yield up to levels not seen since May 2019. The Oscars are tonight so I have broken down this week’s news using quotes from the late Joan Rivers who always made the red-carpet entertaining.
The U.S. housing market got some grim news entering the typically busy spring homebuying season. Pending home sales have now declined four months in a row. Pending sales in February fell 4.1% compared with the previous month. The drop came as mortgage rates extended a recent rise. Mortgage rates threaten to take some helium out of inflated home values. Mortgage rates represent the most noticeable economic impact of the Fed raising rates. Mortgage rates which are now up a full percent higher since the beginning of the year. It probably won’t sink the hot housing market but will likely curb the recent level of price appreciation. A pause in the increase seems logical as home prices have been rising at an unsustainable 18-20% year-over-year pace. That’s an even faster clip than 2004-2006. The difference between now and the housing bubble back then is inventory. Current inventories of homes for sale are far and away the lowest they’ve been in the last 30 years. By comparison, the inventory levels before the financial crisis were five times higher than they are now.
The U.S. housing market got some grim news entering the typically busy spring homebuying season. Pending home sales have now declined four months in a row. Pending sales in February fell 4.1% compared with the previous month. The drop came as mortgage rates extended a recent rise. Mortgage rates threaten to take some helium out of inflated home values. Mortgage rates represent the most noticeable economic impact of the Fed raising rates. Mortgage rates which are now up a full percent higher since the beginning of the year. It probably won’t sink the hot housing market but will likely curb the recent level of price appreciation. A pause in the increase seems logical as home prices have been rising at an unsustainable 18-20% year-over-year pace. That’s an even faster clip than 2004-2006. The difference between now and the housing bubble back then is inventory. Current inventories of homes for sale are far and away the lowest they’ve been in the last 30 years. By comparison, the inventory levels before the financial crisis were five times higher than they are now.
President Joe Biden said Saturday what many people are thinking; that Russia’s leader Vladimir Putin “cannot remain in power”. The remarks were quickly walked back. A White House official said later they meant to prepare the world’s democracies for extended conflict over Ukraine not back regime change in Russia. The remark at the end of the speech raised the possibility of a direct conflict with Russia, though it remains unlikely. The Biden administration has avoided direct military involvement in Ukraine despite Biden’s tough talk throughout. I would expect a bit of volatility Monday as investors react to his speech.
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