Stock indexes are on track to close out the week at new record highs. Year-to-date, the S&P 500 and Nasdaq are both up around +11% while the Dow has gained almost +5.5%. Stock bulls are still being fueled by the Federal Reserve’s latest projections that left in tact the outlook for three 25 basis point rate cuts this year.

Investors also remain bullish AI-related technology stocks with Micron Technology the latest to post better-than-expected earnings results thanks to the world’s insatiable demand for chips. In its earnings call after the close on Wednesday, the company said it expects revenue to grow by a whopping +55% this year. Micron also said its 2024 chip supply is already sold out and a majority of its 2025 supply has already been allocated.  

Other AI chip companies are in a similar situation, indicating that chip makers should continue to benefit from a tight supply and high demand, at least for now. There is really nothing on the earnings calendar for today.

There is also no economic data of note today but there are several Fed officials scheduled to speak, including Fed Chair Jerome Powell who delivers opening remarks at a “Fed Speaks” event this morning.

Investors today could be distracted by business in Washington with Congress rushing to pass a funding bill in order to avoid a partial government shutdown over the weekend. Right now, it looks like the legislation has the votes to pass both chambers but this Congress has surprised us before.

Some procedural holdups mean that the bill may not be passed before the midnight deadline tonight but any resulting shutdown would be brief and over the weekend while government agencies are closed anyway.

Turning to next week, don’t forget there will be only 4 full trading days with markets closed for the Good Friday holiday on Friday. The data calendar is pretty light with most of the focus on housing, including New Home Sales on Monday; The S&P Case-Shiller Home Price Index and the FHFA Housing Price Index on Tuesday; and Pending Home Sales on Thursday.

Also out on Thursday is the final estimate of Q4 2024 GDP, which was revised slightly downward last month to +3.2% from 3.3% previously. It’s unlikely that any of those reports are going to have much influence on market sentiment. The next round of data that investors are anxious to see comes the following week (April 1 - 5) and includes the critical March Employment Situation, as well as some early March inflation data via ISM Manufacturing. Earnings next week are very light with just GameStop and McCormick on Tuesday, and Carnival and Cintas on Wednesday. 

Dow 40,000 ... Wow!  The Dow Jones Industrial Average is closing in on the 40,000 threshold for the first time in 128 years. The Dow Jones Industrial Average first crossed the 1,000 mark on November 14, 1972, and it reached the 10,000 level on March 29, 1999 (meaning it took over 26 years to gain +9,000 points). Throughout most of its history, the stocks on the 30 stocks on the Dow have been listed on the New York Stock Exchange, but in 1999 Microsoft and Intel (which were listed on the NASDAQ), were first included. The Dow Jones industrial average finally broke through the 20,000 barrier on January 25, 2017 (meaning it took just under 18 years to add the next +10,000 points). The Dow Jones Industrial Average topped 30,000 for the first time on November 24th, 2020 (meaning it took just under 4 years to add the next +10,000 points). Crazy to think about this climb. I have to imagine everyone would have laughed you out of the room back in 1972 if you even uttered the nonsense of Dow 40,000! 

How Long Will Russia Remain at War? The war between Russia and Ukraine is now on day 758. There is talk that things are escalating as both sides seem to be turning up the heat to some degree. There is also some chatter amongst war and geopolitical think-tank groups who argue the longer the war continues the more time Putin has to transition to a "war-type economy" inside Russia. If he can get more of his nation's factories and businesses converted to play a bigger part in his war efforts he has a much better chance at taking even a bigger swing at part of Europe or other Nato nations. Source The Independent

Almost 30% of Americans Have Nothing Saved for Retirement:  About 28% of Americans say they have nothing saved for their retirement, 39% are not contributing to a retirement fund, and another 30% don’t think they’ll ever be able to retire. That’s according to a new GoBankingRates survey. Between 25% and 35% of all demographics between the ages of 18 and 64 years old report having nothing saved for retirement, the survey said. Interestingly, the Bureau of Labor Statistics says 69% of private industry workers have access to an employer-based retirement plan but only 52% participate. How much is needed for a secure retirement varies by person and situation, of course. But a study from Northwestern Mutual in 2022 found that U.S. adults anticipate they will need $1.25 million to retire comfortably, while a 2023 Schroders survey put the figure at about $1.1 million. Source MarketWatch

For the First Time in Over Two Years, Home Sales Rise for a Second Consecutive Month: Home sales rose in February from the month prior, marking the first time in more than two years that sales increased for two consecutive months. Sales of existing homes, the majority of purchases, surged 9.5% to a seasonally adjusted annual rate of 4.38 million, the National Association of Realtors said Thursday. Economists had been expecting a pullback of -2% to -3%. The momentum in sales over the last two months comes just ahead of the spring selling season and follows one of the most sluggish periods for the housing market in recent history. “Additional housing supply is helping to satisfy market demand,” said Lawrence Yun, NAR’s chief economist. The most expensive homes saw the biggest increases in sales. Homes sold for more than $1 million shot up +37% in February, compared with the same month a year ago. Sales of homes priced from $750,000 to $1 million rose +23%. Thirty-year fixed mortgage rates have been trending down following a recent peak of 7.79% in October. The rate averaged 6.87% for the week ended March 21, according to Freddie Mac. Home buyers in February also benefited from a more than 10% increase in the number of homes available for sale, compared with the same month a year ago, NAR said. The supply demand imbalance continues to drive prices higher. The national median existing-home price rose +5.7% in February from a year earlier to $384,500. That was a record high price for the month of February, NAR said. All four regions of the country analyzed by NAR saw price increases. Source WSJ

Fed Officials are Not Good at Predicting the Future: The dot plot, in which the FOMC members each give their predictions for future rates, has in the past been a great vehicle to signal changes in the Fed’s thinking. However, the dots aren’t a contractual commitment to do anything. Indeed, their track record since the Fed began publishing them 12 years ago has been very poor. Since releasing its latest update on Wednesday, many have noted that the median expectation for the neutral or long-term fed funds rate ticked above 2.5% (2.6%) for the first time since 2019. Unfortunately, Fed governors are no better at predicting the future than the rest of us. Using the “long term” to mean four years into the future, the below chart shows what the FOMC predicted from 2012 to 2020, along with the actual fed funds rate from four years later. At no point has the fed funds rate been where the FOMC predicted. It stayed far lower than expected throughout the post-crisis decade, then exploded higher — though the governors can be forgiven for not predicting the pandemic. And 2.5% was as high as the rate ever reached in the pre-Covid years. Source Bloomgerg

Expensive Flights Become New Normal on $5 Trillion Green Transition: The global airline industry has long warned passengers they’ll eventually have to pay some of the $5 trillion cost of decarbonizing air travel. The moment has come. Singapore’s government has announced a tax on air fares to fund purchases of pricey sustainable aviation fuel, while neighboring Malaysia has authorized carriers to charge people a carbon levy from next month. In Europe, airlines this year lose one quarter of their free emissions allowance, the first in a series of reductions that’s already estimated to be adding to ticket prices. “We’ve entered a new era,” said Rico Luman, a transport, logistics and automotive economist at ING Groep NV in Amsterdam. “Flying will turn more expensive.” While the policies differ from country to country, the common goal is to clean up an aviation industry that for a century has relied on fossil fuels to function. Airline chiefs fret that unless they show they’re serious about cutting emissions right now, they’ll face fines, flying limits or — worst of all — be grounded completely.  Source Bloomberg


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