Market data was great this last week, with strong housing data, improved industrial production, and softening core inflation data. By the way, the Federal Reserve decided to screw everything up…
US Data
Monday came with news that Berkshire Hathaway had purchased $1B in Apple stock on its recent woes. This provided much needed reinforcement to the NASDAQ. Tuesday brought strong housing data, followed by an increase in industrial production by 0.7% for April[1]. Auto manufacturing lead the way. The early week data brought decent optimism, then the Federal Open Market Committee (FOMC) minutes were released.
The FOMC minutes from April made it very clear that many members deem a rate hike in June would be warranted. That is of course if economic data between now and June continue to improve. The message was received by markets, with the week reversing course and markets ending essentially unchanged for the week.
The positive data received during the week firmed the belief that the FOMC would likely raise rates. Data that was viewed as a positive for our economy was reacted to as a negative for stocks as it was an indication of future monetary tightening.
Housing Data
The housing market improved in April with building permits increasing by 39K or 3.6%. Housing starts increased by 73K or 6.6%. Existing home sales, a great barometer as 90% of the market, increased by 90K or 1.7%[2]. In all, the start of spring appears to be grabbing hold for the real estate markets.
International Data
Europe continues to struggle with deflation. They incurred their second negative inflation reading for the year in April. When fuel and food was removed inflation came in at 0.7% year over year (YoY).
Japanese markets experienced the win fall of a strengthening $ as the week progressed. GDP also reported in at a 1.7% annualized for the first quarter. Many feel that the growth rate is positively skewed since Japan does not adjust for the leap year. The Nikkei grew by 1.9% last week[3].
Conclusion
In all, we need to recognize that the positive data that led to losses late last week were, again, positive. They point to a healthy economic environment, but the potential of tighter monetary policy looms heavy on markets.
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[1] www.mfs.com – week in review
[2] www.investing.com – economic calendar
[3] www.troweprice.com – global markets weekly update