Tuesday's Markets Update (April 25, 2023)

26 Apr 2023 by rate3

On Tuesday, traders were surprised to see that sales of new homes in March had skyrocketed by almost 10 percent, exceeding the projected increase of 1 percent by most analysts. This surprise was compounded by the First Republic Bank's scare, as the bank's stocks plummeted by 50 percent from 16.0 to 8.0. Reports revealed the bank's vulnerable liquidity position, with a 40.8 percent reduction in deposits. Consequently, this led to a 1.4 percent decline in NASDAQ (o: 11968, c: 11799), while BTC (o: 27394, c: 27611, +0.8) continued its upward trend after the sharp downward correction of the previous week.

According to the Census Bureau, sales of new single-family houses surged 9.3 percent in March to 683K, beating the forecast of 630K and marking the highest level in a year. Notably, sales increased in the Northeast (to 65K, a 170.8 percent rise) and in the West (to 161K, a 29.8 percent increase), and to a lesser extent in the Midwest (up 6 percent to 71K). The only decline was seen in the South, which dropped 5.4 percent to 386,000. This was supported by the Case-Shiller Price Index, which showed a 2.0 percent annual gain in February, while both the 10-City and 20-City Composite indexes increased by 0.4 percent each (no increase was projected).

During the month of April, there was a decline in business conditions among manufacturing firms in the Fifth District (Richmond's Fed). This was indicated by the composite manufacturing index which dropped from −5 in March to −10 in April. In particular, two out of the three component indexes of the composite manufacturing index experienced a decline. The shipments index decreased from 2 in March to −7 in April, while the new orders index fell from −11 to −20. On a positive note, the employment index slightly improved, rising from −5 in March to 0 in April.

Overall, the data shows that the continuing increase in prices is accompanied by a slow deterioration in regional business conditions. However, the employment situation remains stable or is even improving in some regions, which increases the likelihood of the next hike in the Fed's rate.