Pending Home Sales Smash Expectations, S&P 500 Tests Session Highs

Key Insights

• Pending Home Sales grew by 8.1% in January. 
• Pending Home Sales are rising for a second month in a row. 
• Markets continue to expect that Fed will push the federal funds rate to the 525 bps – 550 bps level in 2023. 

Pending Home Sales Continue To Rebound After Multi-Month Slump

On February 27, U.S. released Pending Home Sales report, which indicated that Pending Home Sales increased by 8.1% month-over-month in January, compared to analyst consensus of 1%.

Pending Home Sales have started to grow in December, when they increased by 1.1% on a month-over-month basis. The continuation of this growth indicates that the housing market may have started to recover after a multi-month downside trend.

It remains to be seen whether the surprising increase in Pending Home Sales will have a material impact on Fed’s decision making. The FedWatch Tool indicates that there is a 78.2% probabilityof a 25 bps rate hike at the next meeting in March. Traders also expect that the Fed will raise the federal funds rate to the 525 bps – 500 bps range by June. The current market consensus implies that the rate will remain in the 525 bps – 500 bps range until the end of 2023.

U.S. Dollar Tests Session Lows After Pending Home Sales Report

U.S. Dollar Index declined towards the 104.60 level after the release of Pending Home Sales data. The yield of 10-year Treasuries failed to settle above the 3.97% level and pulled back towards 3.91%, which served as a bearish catalyst for the American currency.

S&P 500 tested session highs as traders focused on the encouraging Pending Home Sales report. Lower Treasury yields served as an additional positive catalyst for stocks.

Gold  made an attempt to settle above the $1820 level. The report had minimal impact on gold markets as traders remained focused on the outlook for Fed’s policy.

For a look at all of today’s economic events, check out our economic calendar.