March 16, 2018

The major stock market averages opened higher today (Dow +104 pts; SPX +.36%). Nearly all sectors are in the green, led by energy (+1%), telecom (+.65%) and financials (+.7%). Only tech is trading slightly lower. It looks like traders are putting aside for the moment chaos as the White House. European markets are poised to close up about .7% although most of Asia was down overnight. The VIX Index is trading down toward 15.3. The dollar is stronger today after some better than expected economic data. WTI crude oil opened roughly unchanged but suddenly, and unexpectedly, spiked to $62.00/barrel. Bonds are falling in price, rising in yield. That makes sense alongside a stronger dollar. The 5-year and 10-year Treasury yields are up around 2.63% and 2.84%. 

US Industrial production surged 1.1% in February from prior month levels. This is quite a bit higher than economists were expecting. On a year-over-year basis, production continues to improve, now growing at a 7-year high of 4.35%. The surprise was driven by stronger oil & gas production as well as higher mining output. In addition, the report indicated very strong demand for construction materials. Capacity utilization in the nation’s factories rose to 78.1%, the highest in about two years. Note Bloomberg’s reaction to the report: “We have long posited that the economic cycle is less mature than a calendar count would suggest; the emergence of a stronger contribution to GDP growth from business investment is a typical mid-cycle development.” 

US housing starts—ground-breaking on new projects—fell 7% in February to an annualized rate of 1.236 million units. This seems to be natural give-back after new construction surged in January. Starts include both multi-family and single-family and we’ve seen a boom in multi-family which is now fading. Multi-family starts fell 26%, but single-family starts rose 2.9%. There is still a shortage—especially at the low end—of new single-family homes. New construction completions rose 7.8% last month and that’s a good sign. But the bottom line is that supply isn’t keeping up with demand in this segment.

The Labor Department says job openings across the country surged to a record 6.3 million in January. Industries with the most openings include construction, professional services, transportation and warehousing. You can bet the Federal Reserve will take this in account when mulling its monetary policy decision later this month. 

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