Summary
On March 28, US stock indices closed lower, while gold and oil futures posted gains. Consumer confidence surpassed expectations in March, and US housing prices experienced a seventh consecutive monthly decline. The Federal Reserve’s focus remains on addressing inflation.
Today’s Market Performance
Stock Market: As of the close on March 28, the three major US stock indices closed in negative territory. The Dow Jones Industrial Average declined by 0.12% to 32,394.25 points, the Nasdaq Composite Index fell by 0.45% to 11,716.08 points, and the S&P 500 Index slipped by 0.16% to 3,971.27 points.
Gold Market: COMEX April gold futures increased by 1.01% to $1,973.50 per ounce.
Oil Market: WTI crude oil futures rose by 0.53% to $73.20 per barrel, while Brent crude oil futures climbed 0.68% to $78.65 per barrel.
Macroeconomic Overview
Rising Consumer Confidence
Consumer confidence in the US exceeded market expectations in March, ending a two-month decline. Data from the Conference Board revealed a Consumer Confidence Index of 104.23, surpassing the median economist forecast of 101. The Expectations Index, reflecting consumer outlook for the next six months, rose to 73, while the Present Situation Index dropped to 151.1.
Comments: The uptick in consumer confidence can be attributed to a more optimistic view of the US economic outlook. Consumer confidence is expected to continue to strengthen during the traditional summer vacation season.
Declining US Housing Prices
US national housing prices experienced a seventh consecutive monthly decline in January.
Comments: According to the latest data from S&P CoreLogic Case-Shiller, the S&P/CS National Home Price Index fell 0.2% month-on-month. The index has retreated 3% from its record high in June 2022. Despite January prices being higher than the previous year, the rate of increase has slowed. Unadjusted data shows that the national price index rose 3.8% year-on-year, down from December’s 5.6%. Given the historically high mortgage rates and a weak economic outlook, US housing prices are expected to continue downward.
Fed’s Focus on Inflation
St. Louis Fed President James Bullard emphasized that the Fed’s rate hikes aim to combat inflation rather than alleviate banking pressures.
Comments: In an article on the bank’s website, Bullard mentioned that financial pressures have increased in recent weeks due to a banking crisis. However, he argued that these pressures could be controlled through regulatory policies instead of interest rate policies. Bullard added that appropriate macroprudential policies could mitigate financial pressures in the current environment, while proper monetary policy can continue to exert downward pressure on inflation. He believes that the macroprudential policies adopted for the banking crisis are timely and appropriate. Regulatory authorities have utilized tools developed during the 2007-2009 financial crisis to limit damage to the macroeconomy and are prepared to take additional action when necessary. Reducing inflation remains the Fed’s top priority in the second quarter.
Market Sentiment
President Biden stated that his administration had utilized all available powers to address the banking crisis. However, the White House’s response to the issue is “not yet over.”
Comments: Weakened rate hike expectations and the Fed’s recent balance sheet expansion to release liquidity will likely continue easing the banking credit crisis and the liquidity crisis in the US Treasury market. However, the rebound in inflation and banking clearing risks maintain a high level of uncertainty for future monetary policy. In short to medium term, overall market volatility is expected to decline, but the possibility of short-term tense sentiment dominating market performance cannot be ruled out.
Gold Market
Gold prices reversed a two-day decline and closed slightly higher.
Comments: The most actively traded April gold futures contract on the New York Mercantile Exchange rose by $19.70 or 1% to settle at $1,973.50 per ounce. The modest increase in gold prices during the day can be attributed to the continued decline of the US dollar index. Gold prices may experience short-term fluctuations in the near future.
Oil Market
Brent crude oil futures settled at $78.65 per barrel, up 53 cents or 0.7%. US West Texas Intermediate (WTI) crude oil closed at $73.20 per barrel, up 39 cents or 0.5%.
Comments: Weakening expectations of a Fed rate hike, which affected the US dollar, may support oil prices in the near term. Market sentiment volatility is anticipated to remain high in the short to medium term, with oil prices maintaining fluctuations and the probability of a trending market remaining low.
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