Market 04/18: Existing home sales drop sharply in March

Update on Fed officials' remarks: Williams, Bostic

New York Fed President Williams:

"The Fed continuing to raise rates is not the baseline in my forecast. But if the data requires it, the Fed will raise rates".
Rate cuts will be determined by economic data.
No need to cut rates right now

Atlanta Fed President Bostic:

The path to 2% inflation will be slower and more uneven than expected.
We won't cut rates until the end of this year.
Rates could stay steady if the labor market isn't too hot
I don't think the economy will recess

Jobless claims last week dipped slightly: US labor market remains tight

Initial claims at 212,000 last week, below forecast 215,000 and flat with prior week
Continuing claims at 1.812 million, below expected 1.818 million

However:

WARN layoff notices surge
Challenger March job cuts hit highest since Jan 2023

But initial jobless claims still hover near record lows

Existing home sales drop sharply in March but prices continue to rise

March existing home sales down -4.3% M/M - largest drop since Nov 2022, sharper than expected -4.1% and prior +9.5%

Median sales price up +4.8% Y/Y to 393,500 USD - highest March on record

With current decline in new home prices, existing home prices about to surpass new home prices

FYI: US rental market and CPI growth

New tenant asking rents fell early 2024, smallest 4Q rise (+0.4%) since 2010
Rent index for all tenants stable in Q1, up +5.4% Y/Y

Rent is Fed's 'biggest hurdle' in taming US inflation

Chicago Fed Goolsbee: we thought we had grasped the principle, that housing inflation would basically come down, but it's not falling as fast as we thought

US Rent Inflation Looms Over Potential Interest-Rate Cut - Bloomberg

Soft landing expectations decline via LEI and Beige Book - Philly Fed manufacturing index surges

Conference Board March LEI (Leading Economic Indicators) continues decline streak -0.3% M/M after sole gain last month:

This decline sharper than expected -0.1% and prior +0.2%

The composite index of economic condition assessments from the Fed's Beige Book declined, completely different from recent GDP growth.

While in previous periods, Beige Book assessments were generally quite consistent with the direction of GDP growth.

Meanwhile, the Philly Fed manufacturing index rose to 15.5 (highest since April/2022), higher than estimates of 2 and previous 3.2

5Y Inflation-Linked Treasury Auction (TIPS)

FYI: The principal amount when buying TIPS (principle) will be adjusted upward if inflation and downward if deflation.
TIPS interest rate remains fixed but coupon payments will be adjusted according to inflation conditions
5Y TIPS are auctioned only 4 times a year: in months 4, 6, 10, 12.

High Yield: 2.242% (previous session 2023/12: 1.710%)
Of which 41.87% of successful bidders demanded this yield (previous: 90.05%)
Bid-to-Cover ratio: 2.58 (higher than previous: ~2.55)

Crypto Market: Binance receives full license in Dubai thanks to CZ's resignation

Binance receives Virtual Asset Service Provider (VASP) license in Dubai after Changpeng Zhao (CZ) relinquishes control of the local branch

Binance converts User SAFU (Secure Asset Fund for Users) into USDC stablecoin and now holds 3% of this stablecoin's circulating supply.

Grayscale continues to transfer 3329 BTC worth 207 million USD to Coinbase

Over 6.3 billion USD in short positions will be liquidated if Bitcoin hits 71,000 USD

Earnings updates: Discover, TSMC

Discover

Net revenue: 4.21 billion USD, +13% Y/Y due to loan growth and improved net interest margin
- Digital bank: Pre-tax income drops sharply
- Payment services: Pre-tax income rises to 82 million USD
Diluted EPS: 1.1 USD, -69% Y/Y due to increased credit loss provisions
Dividend: 0.7 USD/share

TSMC

Revenue +17% Y/Y to 18.9 billion USD (higher than expected by 0.3 billion).
- 3nm & 5nm chips contribute 9% and 37% of revenue respectively
Gross margin 53% (-3 pp Y/Y).
Operating margin 42% (-3pp Y/Y).
Capex 5.8 billion USD