“My attitude is that I always want to be better prepared than someone I’m competing against. …” — unknown

1. Fed Officials Still See Three Interest-Rate Cuts This Year — Federal Reserve Chair Jerome Powell indicated that stronger growth and firmer-than-anticipated inflation in recent months hadn’t changed his expectation that the central bank would be able to cut interest rates this year. New projections released Wednesday reinforced that view by showing most of his colleagues expect to cut rates two or three times this year, with a narrow majority penciling in three cuts, the same as in December. The central bank held steady its benchmark federal-funds rate in a range between 5.25% and 5.5%, a 23-year high. Expectations that the Fed would cut rates by June rose to around 75% in futures markets later Wednesday, up from closer to 50% earlier this week, according to CME Group.
2. February home sales spike 9.5%, the largest monthly gain in a year, as supply improves — Sales of existing homes surged 9.5% in February from January to 4.38 million units, on a seasonally adjusted annualized basis, according to the National Association of Realtors. Housing analysts had been expecting a slight drop. Sales were down 3.3% year over year, but it was the largest monthly gain since February 2023. Sales surged the most in the West, up 19.4%, and the South, up 16.4%. Sales in the Northeast were unchanged. Inventory rose 10.3% year over year to 1.07 million homes for sale at the end of February. That represents a still low 2.9-month supply at the current sales pace.
Higher demand continued to push the median price higher, up 5.7% from the year before to $384,500 — the eighth straight month of annual gains. Competition was stiff, with 20% of homes selling above list price.
3. Swiss central bank becomes first major bank to cut rates as Fed and ECB edge closer to taking action — The global rate-cutting cycle was started on Thursday when the Swiss National Bank made a quarter-point reduction in rates that took markets by surprise. Officials of other central banks, including Fed Chair Jerome Powell and European Central Bank President Christine Lagarde, said rate cuts could be coming in just a few months’ time. Lagarde said a June cut was “likely,” while Powell said the base case was that there would be three reductions this year, which markets interpret to mean that a June reduction is highly likely.
Some suggested the Bank of England could cut rates as early as May, after two voting members changed their minds on the need to hike, and as minutes suggested that the bank’s policy would be restrictive even if reductions were made. The Bank of Canada also is planning rate cuts.

The week ahead — Economic data from Econoday.com:

“The purpose of trading is not being right, the purpose is to make money, and I think that’s my number-one rule. Don’t get hung up on your current positions.” -Dana Allen.

1. Inflation Picks Up to 3.2%, Slightly Hotter Than Expected — Consumer prices rose 3.2% in February from a year earlier, the Labor Department said Tuesday, up slightly from economists’ expectations of 3.1%. The second straight month of firmer-than-expected inflation is likely to reinforce the central bank’s wait-and-see posture toward rate reductions when officials meet next week. Still, officials are focused on when to cut rates rather than whether to raise them again. Inflation has declined notably from 40-year highs following the most rapid rate increases in four decades. Still, the report didn’t make the Fed’s coming deliberations easier. Core prices, which exclude food and energy items in an effort to better track inflation’s underlying trend, rose more than expected, both when measured from a year ago and a month ago.
2. Microsoft to Launch AI Assistant for Security Products — Microsoft will make its artificial intelligence product Copilot for Security available worldwide next month, its latest foray into integrating AI with its products. Microsoft’s previous launches in AI have been met with mixed reactions. The company’s launch of Copilot for Microsoft 365, which allowed the chatbot to integrate with Word, Outlook and Teams, was deemed useful by users, but some said it didn’t live up to the price. Copilot for Security can process prompts and respond in eight languages. The program also has a multilingual interface for 25 different languages.
Microsoft said Copilot for Security would be available in a standalone portal and embedded in existing security products from the company.
3. Wholesale inflation rose 0.6% in February, much more than expected — The producer price index, which measures pipeline costs for raw, intermediate and finished goods, jumped 0.6% on the month, the Labor Department’s Bureau of Labor Statistics reported Thursday. That was higher than the 0.3% forecast from Dow Jones and comes after a 0.3% increase in January.
Excluding food and energy, the core PPI accelerated by 0.3%, compared with the estimate for a 0.2% increase. Another measure that also excludes trade services rose 0.4%, compared with the 0.6% gain in January, and was above the estimate for a 0.2% advance. Also, initial filings for unemployment insurance nudged lower to 209,000 last week, a decrease of 1,000 and below the estimate for 218,000, the Labor Department reported. Continuing claims edged higher to 1.81 million, though the previous week’s count was revised sharply lower.
4. U.S. Retail Sales Rose 0.6% in February — excluding autos, sales were up 0.3%. Economists had expected an increase of 0.4%, sans autos.
The monthly report on how consumers are spending or pulling back is viewed as a harbinger for the state of the U.S. economy. Many economists believe that Americans are close to spending down their pandemic-buffered savings and are feeling stretched by inflation, which has impacted the prices of everyday essentials from groceries to rent. Still, the Commerce Department said that the drop in January sales was sharper than previous calculations. January sales were revised from down 0.8% to down 1.1%.

The week ahead — Economic data from Econoday.com:

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“Do more of what works and less of what doesn’t.” – Steve Clark
1. Fed Jerome Powell Says Fed on Track to Cut Rates This Year — Federal Reserve Chair Jerome Powell reiterated that he expects interest rates to start coming down this year, but is not ready yet to say when. Rate cuts won’t be warranted until officials have “gained greater confidence that inflation is moving sustainably” toward the central bank’s 2% goal, Powell told the House Financial Services Committee on Wednesday during the start of two days of testimony on Capitol Hill. Fed officials are trying to balance two risks: One is that they move too slowly to ease policy and the economy crumples under the weight of higher interest rates. The other is that they ease prematurely, allowing inflation to become entrenched at a level well above their 2% goal.
2. ECB Keeps Rates Steady – a June Cut Is Possible — the European Central Bank left interest rates unchanged on Thursday and kept the door open for cuts later this year. As with the U.S. Federal Reserve, the question for ECB President Christine Lagarde is how soon rates can start going lower. Economists widely predict a quarter-point reduction in June. Like the Fed, the ECB raised borrowing costs aggressively from 2022 to 2023 and has been on hold for about half a year now. Also similar to the U.S., inflation in Europe has continued to slow—the last reading for the euro zone was 2.6% in February. That’s still higher than the ECB’s target of 2%, but it has come down dramatically from a peak of more than 10% in October 2022. the big difference between Europe and the U.S. is the poor performance of the economy on the other side of the Atlantic. Growth flatlined in the second half. Germany, the biggest economy among the 20 countries sharing the euro, is in recession.
3. U.S. economy adds 275,000 jobs in February — outpacing forecasts — as unemployment rate hits 3.9%, even with downward revisions in December and January, the economy had added an average of 228,00 new jobs a month since last August. That’s very strong. In February, the household survey showed a sharp increase in the number of unemployed people and a decline in employment. As a result, the jobless rate climbed to a 25-month high of 3.9% from 3.7%. Employment growth in the previous two months were revised 167,000 lower than previously reported. That made the increase in February not quite as strong as it appeared.
4. White House Revives Plan to Save Homeowners Money on Closing Costs — the initiative aims to reduce one of the biggest costs associated with closing on a mortgage: title insurance. Under a pilot program, government-controlled mortgage giant Fannie Mae will waive a requirement for title insurance on mortgage refinancings it purchases from certain lenders.
The move reignites a fight with the industry over the cost, and necessity, of the insurance, part of the White House’s broader aim to chip away barriers to homeownership. The administration announced the program hours ahead of President Biden’s State of the Union address. The industry is dominated by a few big players, including the publicly traded First American Financial. The American Land Title Association, an industry group, criticized the plan as “a purely political gesture offering a false promise of savings for homeowners.” The group said it would expose consumers, lenders and taxpayers to greater financial risk.

The week ahead — Economic data from Econoday.com:

“Being too far ahead of your time is indistinguishable from being wrong.” So” ― Howard Marks

1. US GDP Revised Slightly Lower Despite Stronger Consumer Spending — Gross domestic product rose at a revised 3.2% annualized pace in the fourth quarter, compared with a prior estimate of 3.3%. Consumer spending advanced at a 3% rate, faster than initially estimated, Bureau of Economic Analysis figures showed Wednesday. Inflation was revised higher. Last year the economy expanded 2.5%, marking an acceleration from 2022 and far outperforming the broader eurozone and Japan. The Fed’s preferred inflation metric — the personal consumption expenditures price index — rose at a 1.8% annual rate in the fourth quarter. Excluding food and energy, the gauge increased at a 2.1% pace, the Bureau of Economic Analysis report showed. Both were marginally higher than initially estimated.
2. PCE shows biggest rise in U.S. inflation in four months — The PCE index rose 0.3% last month, the government said Wednesday. That matched the forecast of economists polled by The Wall Street Journal. The more closely followed core rate that strips out food and energy rose a sharper 0.4%, the largest increase in a year. The core index is viewed as a better predictor of future inflation. The yearly rate of inflation, meanwhile, still fell a few ticks to 2.4% from 2.6%. The rate of core inflation in the 12 months ended in January slowed to 2.8% from 2.9%.
3. AI Startup Making Humanoid Robots Raises $675 Million With Bezos, Nvidia in Funding Round — Tech companies are pouring cash into AI at a breakneck pace, with investors and analysts increasingly believing the AI boom is sustainable. More than $29 billion was invested in generative AI companies last year, according to research firm PitchBook. Nvidia, the chip maker at the heart of the AI craze, has a market cap around $2 trillion, making it one of the biggest companies in the U.S.
AI has powered the technology behind chatbots like OpenAI’s ChatGPT and the humanoid robots designed by Figure. The startup said it was working with OpenAI on developing new AI models for humanoid robots. Figure said the investment would speed up the commercial deployment of its robots. The startup has said it signed an agreement with BMW to use its robots for automotive manufacturing.
4. Congress votes to avert government shutdown — Facing an end-of-the-week deadline, the House of Representatives passed a bill to temporarily fund one set of federal agencies through March 8 and another set through March 22. It quickly moved to the Senate, which passed it Thursday evening, on a 77-13 vote. The bill now goes to President Joe Biden to be signed into law ahead of a Saturday deadline. Without action, a handful of agencies, including the Department of Agriculture, would partially close early Saturday. The remaining agencies, including the Pentagon, would partly shutter after March 8.

The week ahead — Economic data from Econoday.com: