The major averages ended the week mixed, with the Nasdaq posting a gain, the Dow slipping and the S&P finishing not far from where it started after the minutes of the last Federal Reserve policy meeting showed the many in the central bank consider a rate hike next month as more likely to be the right course of action than many market participants may have anticipated.
MACRO NEWS: On Wednesday, the Federal Reserve released the minutes from its last FOMC meeting, which showed that the members of the Fed’s rate setting committee saw “diminished” global economic risks and saw a June rate hike as “likely” if data improved as expected. Officials wanted to keep options open for June, but there were a range of views on whether the economic numbers would be adequate to support a tightening next month. However, the market clearly read the minutes as an indicator that a hike is possible in the short-term, as illustrated by the sharp rise in the market-implied odds of such a scenario…
In the U.S., consumer prices in April rose 0.4% compared to the prior month, versus expectations for the consumer price index to be up 0.3%. If food and energy are removed, the core CPI reading was up 0.2%, matching expectations. Housing starts were up 6.6% to a 1.17M rate in April, versus expectations for a rise of 3.3%. Building permits were up 3.6% to a rate of 1.12M, versus expectations for them to be up 5.5%. Industrial production rebounded 0.7% in April, which was better than the 0.3% month-over-month increase that was expected. The Empire State manufacturing index fell 18.6 points to -9.02 in May, which was much worse than the 6.5 reading that was forecast. The NAHB homebuilder sentiment was flat at 58 in May, holding that level for a fourth consecutive month. Initial jobless claims fell to 278,000 in the week ended May 14, nearly matching expectations for 275,000 first-time claims… In Asia, a raft of Chinese data fell short of expectations, as readings on industrial production, retail sales, investment, money creation and credit growth all missed estimates. Japan’s real GDP unexpectedly grew 1.7% quarter-over-quarter in first three months of the year, which was much stronger than expected.
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