Markets rebound, supporting the Fed (technically speaking for the week of 3/14-3/18)

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Let’s review this week’s economic data releases.

The producer price index increased:

The producer price index for final demand rose 0.8% in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This increase follows advances of 1.2% in January and 0.4% in December 2021. (See Table A.) On an unadjusted basis, final demand prices rose 10.0% for the 12 months ended February.

Here is a table of data:

Various PPI indices

Various PPI indices (FRED)

The chart above breaks the data down into energy-affected prices (blue and green) and non-energy-affected prices (red and purple). Clearly, energy prices have a profound impact on some data.

Retail sales increased slightly:

Retail Sales Press Release

Retail Sales Press Release (Census)

Here is a 5-year chart:

Actual retail sales

CPI Adjusted Actual Retail Sales (FRED)

This data peaked in March 2021. Since then, it has been trending sideways. The current level is still very high (note that the chart above is inflation adjusted; the press release is not).

Building permit 1 housing refused:

press release permit to build 1 dwelling

press release permit to build 1 dwelling (Census)

Here is a graph of the data over 5 years:

Building permit for 1 dwelling

Building permit 1 lot (FRED)

This data rebounded at the end of last summer and has been on the rise ever since. This month’s break is not a concern.

Industrial production increased:

Total industrial production rose 0.5% in February to 103.6% of its 2017 average. Manufacturing output rose 1.2% after being little changed in each of the previous two months. In February, the utilities index fell 2.7% and mine production edged up 0.1%.

Here is a table of data:

Industrial production

Industrial production (FRED)

This data recovered almost all of its losses from the pandemic.

The Chicago Fed released its latest financial conditions indices. Here is the risk component:

Chicago Fed Financial Risk Index

Chicago Fed Financial Risk Index (FRED)

This index has increased, which could indicate problems to come.

The St. Louis Fed also released a Financial Stress Index this week:

St. Louis Financial Stress Index

St. Louis Financial Stress Index (FRED)

This index also increased slightly.

I will be covering existing home sales next week after I get some additional real estate data.

Keep in mind that most of this data is still from before Ukraine, so it doesn’t include any impacted data. We should get that data soon to see if the war had any impact on the US economy. That being said, most of the data is positive. However, prices remain an issue and the financial risk increases.

Let’s move on to the charts, starting with last week’s action:

5-day SPY, QQQ, DIA and IWM

5-day SPY, QQQ, DIA and IWM (Stock charts)

These are excellent graphics. They run from southwest to northeast. It doesn’t get more bullish than that.

10 days SPY, QQQ, DIA and IWM

10 days SPY, QQQ, DIA and IWM (Stock charts)

The 10-day charts of all indices show a clear break over the past two weeks.

3 months SPY, QQQ, DIA and IWM

3 months SPY, QQQ, DIA and IWM (Stock charts)

On the 3-month charts, the SPY, QQQ and IWM all broke through resistance. The SPY is now above the 200-day EMA while the QQQ and IWM are still below this level.

Clearly, markets are happy with the Fed’s decision to raise rates.

It is also possible that the market is wrong. At this point, consider this editorial by Lawrence Summers.