Daily Market Color

Dovish Fed Sends Equities Higher

Rates fall as Fed maintains dovish stance
Equities renewed their trek higher, and yields retreated after the Fed reiterated its stance on near-zero interest rates through 2023 and its continuing asset purchases. The accommodative guidance led to a rally in risk assets as both the S&P and DJIA closed at record highs. Early in the day, market-implied inflation expectations hit twelve-year highs while the 10yr yield reached 1.69% before closing at 1.64%; still 5bps higher than yesterday’s close.
Fed’s new dot plot
Although the Fed did not change its stance on raising rates or changing its asset purchasing levels, the Fed’s dot plan did show movement within the committee when rates will move higher. In the committee’s December meeting, five of the seventeen officials signaled higher rates by the end of 2023, compared to seven of eighteen officials seeing higher rates by year-end 2023 in the March meeting.
U.S. housing starts retreated in February
Residential housing starts decreased to its slowest rate since August, dropping 10.3% in February to an annualized rate of 1.42 milion. The decrease was partly due to the extreme winter weather during the month. Applications to build decreased 10.8% but exceeded the pace of starts for the seventh straight month to an annualized rate of 1.68 million.

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