Fed Could Surprise Markets And Raise Rates Sooner

Fed Could Surprise Markets And Raise Rates Sooner

$DIA, $SPY, $QQQ, $VXX

If you believe the indicators that suggest the US manufacturing and housing sectors are improving and inflation on the rise, the US Fed could hike rates sooner than most participants think.

Excluding energy, prices rose solidly. The core CPI, which ex-food, rose by the fastest pace in nearly 4 years.

There were few categories where prices declined.

There was 1 category that may have artificially upped the price increase: Apparel prices rose 1.6%. That makes no sense since most clothing sold in the US imported and do not see that kind of increase in the import price data.

On the housing front

Housing starts rose in February despite a massive 50% dive in the Northeast. The Midwest, South and West were all up.

There were increases in both the single-family and multi-family segments of that market.

Looking forward, permit requests did drop, though they were running well ahead of starts. Even after the February decline, the 3-month average for permits is above the average for construction, so maybe the fall does not signal a future slowdown in activity.

Industrial production fell sharply in February.

Utility output was down on the weather.

Manufacturing output was OK, adding to a strong gainer marked in January. The nation’s industrial heartland is coming back and is no longer the weak link.

The recent data came down on the side of the Fed taking the cautious approach at its monthly meeting, but Wednesday’s data especially the inflation report, warns that the days of no price pressures could be past.

Inflation is a real issue, despite the headline declines in the reports.

There is a broadening in the price pressures and while it is not high in here, it is no longer below the Fed’s target, ex-energy.

Because of the recent drop in Crude Oil prices, it may take until Y 2017 or longer before the Y-Y energy price decline is re-balanced.

But when that happens, the overall inflation index will also exceed the Fed’s 2.0% target and the FOMC members have likely started to plan for that happening.

The members are hinting that rates could/may/will be going up.

Wednesday’s US major stock market indexes finished at: DJIA +74.23 at 17325.76, NAS Comp +35.30 at 4763.96, S&P 500 +11.29 at 2027.22

Volume: Traded was below average with about 910-M/shares exchanged on the NYSE.

• Russell 2000 -5.0% YTD
• NAS Comp -4.9% YTD
• S&P 500 -0.8% YTD
• DJIA -0.6% YTD

Stay tuned…

Paul Ebeling

HeffX-LTN

The post Fed Could Surprise Markets And Raise Rates Sooner appeared first on Live Trading News.