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The Federal Reserve’s latest weekly data showed a modest increase in the size of its balance sheet, while reserve balances moved lower. The Fed’s balance sheet rose to $6,656 billion from $6,646 billion, indicating a small weekly expansion. At the same time, reserve balances with Federal Reserve Banks fell to $2.999 trillion from $3.073 trillion. The combination suggests that while the overall Fed asset base increased slightly, banking-system reserve liquidity declined over the week.

Source: Federal Reserve

The latest U.S. Treasury auctions showed a mixed picture at the short end and a slight easing in inflation-linked long-term yields. The 4-week bill auction came in at 3.615%, down from 3.640%, while the 8-week bill auction edged up to 3.635% from 3.625%. Meanwhile, the 10-year TIPS auction cleared at 1.896%, below the previous 1.940%, suggesting investors accepted a slightly lower real yield for inflation-protected debt. Overall, the results point to broadly stable short-term funding conditions, while long-dated inflation-linked demand looked somewhat firmer.

Source: U.S. Department of the Treasury

The Atlanta Fed GDPNow estimate for Q1 was revised down to 2.3% from 2.7%. The downgrade suggests the expected pace of US growth in the first quarter has softened and points to a less robust near-term outlook than previously estimated. While the economy is still projected to expand, the lower estimate signals that momentum may be moderating.

Source: Federal Reserve Bank of Atlanta

US wholesale-sector data showed a mixed picture in January. Wholesale trade sales rose 0.5% month-on-month, but that was still slower than the previous 1.3% increase. At the same time, wholesale inventories fell 0.5%, missing the 0.2% increase expected by the market and reversing from the prior 0.2% rise. The combination suggests sales activity remained positive, but inventory liquidation may reflect caution about near-term demand.

Source: US Census Bureau

The US Leading Index fell 0.1% in January, matching expectations and improving slightly from the previous 0.2% decline. Even with the smaller drop, the index remained in negative territory, suggesting the forward-looking growth signal is still soft. The message from the data is that the US economy may still be expanding, but leading indicators are not yet pointing to a strong rebound in momentum.

Source: The Conference Board

The US housing market started the year on a weaker note, with new home sales falling to 587K in January, well below the 722K forecast and down from 712K previously. On a monthly basis, new home sales dropped 17.6%, a much steeper decline than the previous 6.8% fall. The data points to a sharp loss of momentum in housing demand and suggests higher borrowing costs and affordability pressure are still weighing heavily on the new-home market.

Source: US Census Bureau

The latest U.S. labor-market update showed that initial jobless claims fell to 205K, better than the 215K forecast and lower than the previous 213K, reinforcing the view that layoffs remain limited. At the same time, the 4-week average slipped to 210.75K from 211.50K, adding to the message that the labor market is still relatively stable. But there was a softer detail underneath: continuing jobless claims rose to 1,857K, slightly above the 1,850K expectation and higher than the previous 1,847K. The overall picture suggests companies are still not cutting workers aggressively, but unemployed workers may be taking a bit longer to find new jobs.

Source: U.S. Department of Labor

The Philadelphia Fed Manufacturing Index rose to 18.1 in March, beating the 8.3 forecast and improving from 16.3 previously, signaling that factory activity in the region remained firmly in expansion territory. Beneath the headline, the picture was mixed but still constructive. Employment returned to positive territory at 0.8 from -1.3, while the CAPEX index climbed sharply to 25.8 from 14.4, pointing to stronger investment intentions. However, new orders eased to 8.6 from 11.7, and business conditions slipped to 40.0 from 42.8. The more inflation-sensitive detail came from Prices Paid, which jumped to 44.7 from 38.9, suggesting cost pressure in manufacturing is heating up again even as activity remains resilient.

Source: Federal Reserve Bank of Philadelphia

U.S. building permits came in at 1.386 million in January, slightly above the 1.376 million forecast, but still below the previous 1.455 million reading. On a monthly basis, permits fell 4.7%, reversing from the prior 4.8% increase. The data suggests that while permit activity held up a bit better than expected in level terms, the housing pipeline still lost momentum at the start of the year.

Source: U.S. Census Bureau

Federal Reserve Chair Jerome Powell said uncertainty has increased because of the Iran war, reinforcing investor concern that the conflict could keep oil prices elevated and make the inflation outlook more difficult. The Fed kept rates unchanged at 3.75%, while Powell said policymakers are watching how higher energy costs feed through to inflation.

The broader market takeaway is that traders are increasingly worried the conflict, now into its third week, could push energy costs higher for longer, weigh on global growth, and reduce the room for central banks to cut rates aggressively. That is why markets remain highly sensitive to oil prices, Fed guidance, and any sign of escalation or de-escalation in the Middle East.

Source: Reuters; Federal Reserve.

The latest U.S. TIC data showed a clear cooling in foreign demand for American long-term assets. Net long-term transactions dropped to $15.5 billion in January, down sharply from $96.5 billion previously and far below the $71.6 billion expectation. Net long-term transactions, including swaps, also came in at $15.5 billion, compared with $96.5 billion in the prior reading. More importantly, overall net capital flow turned negative at -$25.0 billion, a major deterioration from the previous $113.9 billion inflow. One partial offset came from foreign buying of U.S. Treasury bonds, which rose to $49.9 billion after a -$27.0 billion reading previously. The message is that overseas appetite for U.S. assets weakened materially in January, even though demand for Treasuries improved.

Source: U.S. Department of the Treasury

The Federal Reserve left its policy rate unchanged at 3.75%, in line with market expectations, keeping policy steady while releasing updated economic projections and a new policy statement. The bigger takeaway came from the interest-rate path: the current projection was revised down to 3.4% from 3.6%, while the 1st-year projection also fell to 3.1% from 3.4%. The 2nd-year projection remained unchanged at 3.1%, while the longer-run projection edged up to 3.1% from 3.0%. Overall, the decision itself was expected, but the updated rate path suggests the Fed sees a somewhat lower near-term policy trajectory even as its longer-run neutral view moved slightly higher.

Source: Federal Reserve