“Stock market doesn’t only teaches to make money but it also teaches lot about life, patience, persistence and wisdom.” ― Raj Mishra

1. U.S. Home Sales Fall for 12th Straight Month — Sales of previously owned homes, which make up most of the housing market, fell 0.7% in January from the prior month to a seasonally adjusted annual rate of 4 million, the slowest since October 2010, the National Association of Realtors said Tuesday. January sales fell 36.9% from a year earlier.
January’s decline marked the longest streak of back-to-back monthly declines on record in figures going back to 1999, NAR said. Surprisingly strong inflation, jobs and retail spending figures in recent weeks have fueled expectations that the Federal Reserve could raise interest rates more than investors anticipated. The Fed has aggressively raised its benchmark federal-funds rate to cool the economy and bring down high inflation, hitting the rate-sensitive housing market particularly hard.
2. Fed Minutes Show Most Officials Favored Quarter-Point Rate Rise — Officials at their meeting earlier this month agreed to slow rate increases by lifting their benchmark federal-funds rate by a quarter-percentage point, following larger moves of a half point in December and 0.75 point in November. Minutes from that meeting, showed most thought a slower pace provided the best way to manage the risks of raising rates too much or too little. But the minutes also revealed some officials were concerned about stopping or slowing their inflation-fighting campaign too soon. The latest increase brought the fed-funds rate to a range between 4.5% and 4.75%, extending the fastest series of rate rises since the early 1980s. While the quarter-point rate rise was backed unanimously by the rate-setting committee, the minutes said a few officials favored or would have also agreed to support a half-point increase.
3. Economy Showing Strength in Early 2023 After Last Quarter’s GDP Gain Revised Modestly Lower — gross domestic product, a broad measure of the goods and services produced across the U.S., rose at a 2.7% annual rate in the fourth quarter, adjusted for seasonality and inflation, the Commerce Department said Thursday. That was down from a previous estimate of 2.9% growth, and slower than the third quarter’s 3.2% growth. Entering this year, forecasters had projected the economy to cool, but recent data shows a strong labor market and improved spending. Worker claims for unemployment benefits, a proxy for layoffs, ticked down last week, the Labor Department said Thursday. Hiring accelerated last month and the unemployment rate fell to a 53-year low. Retail sales jumped 3% in January, reversing two consecutive months of decline, a separate Commerce Department report showed. Business activity, particularly in the services sector, picked up in February, according to surveys of manufacturers and service providers released last week.

1. US Inflation Stays Elevated, Adding Pressure for More Fed Hikes — US consumer prices rose briskly at the start of the year, a sign of persistent inflationary pressures that could push the Federal Reserve to raise interest rates even higher than previously expected.
The overall consumer price index climbed 0.5% in January, the most in three months and bolstered by energy and shelter costs, according to data out Tuesday from the Bureau of Labor Statistics. The measure was up 6.4% from a year earlier. Excluding food and energy, the so-called core CPI advanced 0.4% last month and was up 5.6% from a year earlier. Economists see the gauge as a better indicator of underlying inflation than the headline measure.
2. U.S. Retail Sales Rebounded Sharply in January — U.S. retail sales jumped 3% in January as consumers broadly boosted spending on vehicles, furniture, clothing and dining out, adding to signs that economic growth picked up at the start of the year. The unexpectedly strong January employment report and still solid wage gains bode well for consumer spending, and some economists think economic growth could be picking up. The Federal Reserve has raised interest rates aggressively since last March in an attempt to slow the economy and bring down inflation. The consumer-price index climbed 6.4% in January from a year earlier, down slightly from 6.5% in December but still well above the Federal Reserve’s 2% inflation target. Retail sales grew broadly across the economy in January, including at restaurants, car dealerships, department stores and furniture and appliance sellers.
3. January PPI Report Shows Producer Prices Rose — U.S. supplier prices rose 6% in January from a year earlier, a sign of still stubborn inflation pressures in the economy.
That increase in the producer-price index, which generally reflects supply conditions in the economy, was slower than December’s 6.5% gain, the Labor Department said Thursday. And it was down markedly from the 11.7% rise in March 2022, the recent peak. The PPI increased 0.7% in January from the prior month, compared with a revised 0.2% drop in December, and significantly faster than the 0.2% average monthly rise in the year before the pandemic. Fed officials in recent public appearances have steeled themselves for a long inflation fight. Earlier this month policy makers raised their benchmark federal-funds rate by 0.25 percentage point, bringing it to a range between 4.5% and 4.75%, the highest level since 2007. Officials are on track to raise interest rates at their meeting in March and to signal further increases will be likely.
4. Two Fed Officials Would Have Supported Larger Rate Increase This Month — two Federal Reserve officials said they would have supported raising interest rates by a half percentage point at the central bank’s meeting earlier this month given the strength of economic demand and inflation. Ms. Mester said it was too early to specify the size of the rate increase that would be appropriate at the Fed’s next meeting, on March 21-22. But she said that the central bank wasn’t locked in to raising rates by a quarter point at coming policy meetings. “It’s not always going to be, you know, 25 [basis points],” she said during a question-and-answer session at a conference in Sarasota, Fla. “As we showed, when the economy calls for it, we can move faster. And we can do bigger [increases] at any particular meeting. St. Louis Fed President James Bullard also said Thursday he would have favored a half-point rate increase at the last meeting and that he would support moving as quickly as possible to raise rates to just below 5.5%.

The week ahead — Economic data from Econoday.com:

There will not be any re-cap for the week of February 10th, 2023. We are away for some needed R&R.

Have a good week.

The staffs at EGS.

The week ahead — Economic data from Econoday.com:

“Don’t look for the needle in the haystack. Just buy the haystack.” — John Bogle,

1. Worker Pay Gains Cooled Modestly Late Last Year as Fed Weighs Inflation — employers spent 1% more on wages and benefits last quarter versus the prior three months, a slowdown from a 1.2% increase in the third quarter, the Labor Department said Tuesday. From a year earlier the employment-cost index advanced 5.1%, in line with the 5% annual gain in the third quarter. The compensation report confirms other recent signs that wage growth has slowed, and comes as Fed officials start a two-day policy meeting. They are likely on Wednesday to approve raising their benchmark federal-funds rate by a quarter percentage point, down from their half-point increase in December, which followed four straight increases of 0.75 point.
2. Fed Approves Quarter-Point Rate Hike, Signals More Increases Likely — the Federal Reserve approved an interest-rate increase of a quarter-percentage-point and signaled plans to raise rates again next month to continue lowering inflation. The decision Wednesday followed six consecutive rate rises that were larger, including an increase of a half-point in December and a 0.75-point increase in November. The latest increase caps a year in which the Fed lifted its benchmark federal-funds rate from near zero to a range between 4.5% and 4.75%, a level last reached in 2007. That extends the central bank’s most rapid pace of rate increases since the early 1980s to fight inflation, which hit a 40-year high last year.
3. ECB Hikes by Half-Point and Signals Same Again in March — the European Central Bank lifted interest rates by a half-point, with President Christine Lagarde saying another such move is almost certain next month, despite conceding that the inflation outlook is improving.
Policymakers, as expected, raised the deposit rate to 2.5%, the highest since 2008. Lagarde warned that the most aggressive bout of monetary tightening in ECB history isn’t done — even as energy prices plunge and the Federal Reserve moderates the pace of its own hikes.
4. Unemployment Falls to 3.4%, Lowest in 53 Years, Jobs Report Shows — the U.S. labor market accelerated at the start of the year as broad-based hiring added a robust 517,000 jobs and pushed the unemployment rate to a 53-year low. January’s payroll gains were the largest since July 2022 and snapped a string of five straight months of slowing employment growth, the Labor Department said Friday. The unemployment rate was 3.4% last month, its lowest level since May 1969. Wage growth continued to soften last month, despite the strong job gains. Average hourly earnings grew 4.4% in January from a year earlier, down from a revised 4.8% in December. Annual revisions to employment and pay data suggest that wage growth has been cooling—but at a slower pace than previously thought.
5. Industry Group Surged – Shows Bullish Patterns — courtesy of Sentiment Trader, several industry groups surges — see below chart for more details.

The week ahead — Economic data from Econoday.com: