Market Review March 25, 2024

Today's Economic Event Overview: 

• Building Permits: The number of building permits issued in March 2024 increased to 1.524 million, surpassing both the forecast of 1.518 million and the previous value of 1.489 million. This rise indicates continuing strength and investor confidence in the residential construction sector.

• New Home Sales (MoM) (Feb): There was a slight decline of 0.30% in month-over-month new home sales, contrasting with the previous increase of 1.70%. This suggests a slight cooling in the housing market but not necessarily a trend reversal.

• New Home Sales (Feb): The actual sales figures for new homes stood at 662K, slightly below the forecast of 675K and also below the previous figure of 664K. While this does not represent a significant decline, it indicates a minor softening in the demand for new homes.

• 2-Year Note Auction: The yield on 2-year Treasury notes decreased to 4.60% from the previous rate of 4.69%. This reduction in yield suggests increased demand for shorter-term U.S. government debt, potentially reflecting investor sentiment leaning towards caution given current economic conditions.

Impact Analysis

• Impact on USD:
• The increase in building permits could support the USD by signaling ongoing economic growth through construction activity.
• The slight decrease in new home sales and lower yields on 2-year notes might, however, indicate some hesitancy among investors, which could pressure the USD.

• Impact on Gold:
• The mixed signals from the housing market and a drop in short-term interest rates might drive some investors towards gold as a safe-haven asset.
• Typically, lower interest rates decrease the opportunity cost of holding non-yielding assets like gold, potentially making it more attractive.

• Impact on Equity Futures:
• The data provides a mixed outlook for equity markets. On one hand, robust building permits data suggests continued economic activity; on the other, slight softening in new home sales could dampen optimism in the real estate and related sectors.
• Lower yields on 2-year notes might suggest a risk-off mood among investors, which could lead to cautious trading in the equity markets.

The economic indicators reflect a somewhat cautious but still active economic environment. The increase in building permits is a positive sign, though the mixed data from the new home sales and lower yields on 2-year notes highlight potential areas of concern among investors regarding short-term economic growth prospects.