Weekly Market Commentary March 3, 2025
Most market indices closed the week lower as new U.S. data sparked concern among investors over a slowing economy and sticky inflation, leading them in search of safer assets.
The S&P 500 declined by -0.98%
The Dow Jones Industrial Average increased by 0.95%
The tech-heavy Nasdaq declined by -3.47%
The 10-Year Treasury yield closed at 4.25%
Last week, a slew of housing reports provided the market with a clearer understanding of the sector, but the data did not inspire much confidence.
On Wednesday, January New Home Sales data came in weaker than expected at 657,000 units, compared to the estimated 679,000 units. This was a significant drop from last month’s figure of 734,000 units, representing a decline of 10.5%. Building permits, a key indicator for future housing starts, were revised lower. Although the data came in higher than initially projected, this revision diminishes the previous week’s outperformance and may prompt markets to re-evaluate future projections.
Additionally, January Pending Home Sales month-over-month numbers declined by 4.6%, exceeding expectations of a 0.9% decline. This marked the second consecutive month of declining volume, with both January and December experiencing declines greater than 4%. In the background of this housing data was the sharp rise in 30-year mortgage rates, which bottomed in mid-December at 6.60% and peaked in mid-January at 7.04%, before ending the month at 6.95%. February has seen a steady decline in rates, and markets will closely monitor future reports to gauge how much demand lower rates might release.
Speaking of interest rates, markets observed movements in yields in the middle of the curve this week as 2-, 5-, and 7-year notes were auctioned off. Across the board, yields fell compared to last month. This decline in yields could be attributed to various factors, including sluggish housing data, weakening consumer confidence, and modest Q4 GDP data.
Perhaps the best news for markets last week came on Friday, as the Core Personal Consumption Expenditure (PCE) Price Index was in line with analyst expectations. January’s year-over-year numbers came in at 2.6%, significantly lower than December’s reading of 2.9%. This benign reading may help alleviate some of the inflation and stagflation fears that had been brewing since the hotter-than-expected Consumer Price Index (CPI) reading earlier this month.
The fall in yields and middling inflation numbers can be interpreted in various ways. Some might attribute it to the recent housing data, consumer confidence figures from Tuesday, and the modest Q4 GDP data influenced by personal spending. However, one week of data does not establish a trend, and markets will continue to look for emerging patterns.
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