Chief Economist Scott Brown discusses the latest market data.
Tensions in Ukraine dominated. Share prices fell and bonds rallied.
The Federal Open Market Committee (FOMC) minutes from the January 25 to 26 policy meeting suggested no haste in raising short-term interest rates, lowering the market odds of a 50-basis-point hike at the mid-March meeting. Fed officials generally expect inflation to moderate, but most felt that if inflation did not decline as expected, “it would be appropriate for the FOMC to remove policy accommodation at a faster pace than they currently anticipate.”
The Producer Price Index rose 1.0% in January (+9.7% y/y). Retail sales jumped 3.8% in January, following a 2.5% decline in December, likely reflecting a changing seasonal pattern through the pandemic (unadjusted sales fell 18.5%, following a 9.1% gain in December). Industrial production rose 1.4% in January (+4.1% y/y), reflecting a record 9.9% increase in the output of utilities (cold weather). Manufacturing output rose 0.2% (+2.7% y/y), with motor vehicle production down 0.9% (-6.2% y/y). Single-family building permits rose 6.8% in January (-5.0% y/y). The Index of Leading Economic Indicators fell 0.3% in January (following +0.7% in December and +0.8% in November), with six of 10 components making negative contributions (the largest from the increase in jobless claims and the drop in consumer expectations).
Next week: The focus is expected to remain on Ukraine. The data should not have an impact on the economic outlook or on expectations for monetary policy. However, two Federal Reserve governors will be speaking on the current state of the economy.
As of close of business 2/17/2022
S&P Sector Performance (YTD) – 2/18/2022