Market Review February 16, 2024

Today's Economic Event Overview: 

Building Permits: A decrease in building permits from the previous month to 1.470M against a forecast of 1.509M suggests a cooling in the housing market, potentially due to higher costs or decreased demand.

Core PPI and PPI (MoM): Both the Producer Price Index and its core variant (excluding volatile items like food and energy) have risen, indicating higher production costs that could translate into future consumer inflation.

Housing Starts: A significant decline in housing starts (-14.8%) much lower than the expected stability (0.00%) suggests a sharp slowdown in new residential construction, which is a key indicator of economic health.

Michigan Inflation Expectations and Consumer Sentiment: Both the 1-year and 5-year inflation expectations indicate a slight uptick, potentially reflecting concerns about prolonged inflation. Meanwhile, consumer sentiment shows a modest improvement, suggesting some resilience among consumers despite economic challenges.

Atlanta Fed GDPNow: The GDP forecast remains steady, suggesting that, overall, economic growth is stable despite sector-specific issues.

U.S. Baker Hughes Oil and Total Rig Count: A slight decrease in both oil and total rig counts might reflect strategic adjustments or reactions to global oil market conditions.

CFTC Speculative Net Positions:

• Crude Oil: An increase in speculative net positions, indicating a bullish outlook among traders.
• Gold: A significant drop in speculative positions, possibly reflecting a less bullish outlook or profit-taking after recent gains.
• Nasdaq 100 and S&P 500: Speculative positions show slight changes, with a less negative position in S&P 500 futures suggesting a potential decrease in bearish sentiment.

Impact on USD

• The increase in PPI could signal impending inflation, which might lead the Federal Reserve to consider tightening policies, potentially strengthening the USD. However, weak housing data could temper this effect by signaling underlying economic softness.

Impact on Gold

• Rising inflation expectations and mixed economic signals could drive investors towards gold as a hedge against inflation and economic uncertainty, despite the recent decrease in speculative positions.

Impact on Equity Futures

• Mixed consumer sentiment and inflation expectations may lead to cautious optimism in equity markets. However, the bearish undertone in housing and production could dampen enthusiasm.

The economic landscape presents a mixed view with rising production costs and inflation expectations juxtaposed against cooling housing starts and generally stable consumer sentiment. The slight improvements in consumer expectations amidst these challenges are noteworthy and will require close monitoring to gauge the broader economic impact.