Retail Sales Surge, Oil Prices Spike & Fed Rate Cuts Delayed

This week’s economic data includes: (1) existing home sales for March, (2) Producer Price Index (PPI) Index for March, (3) weekly initial jobless and continuing claims and (4) market trends across equities, oil and Treasury markets along with rate-cut

expectations.

 

KEY SUMMARY:

Existing home sales fell to their lowest level since June as higher mortgage rates and weaker buyer demand weighed on activity, while limited inventory continued to support prices, prompting the National Association of Realtors (NAR) to sharply cut its 2026 sales outlook amid growing affordability pressures.

Existing home sales weakened further in March, declining 3.6% to a seasonally adjusted annual rate of 3.98 million units, below expectations and the lowest level since June. Softer buyer demand reflected lower consumer confidence, slower job growth, and higher mortgage rates, while tight supply continued to limit overall transaction volumes. Regionally, sales fell month over month across all markets, led by sharp declines in the Northeast, and year-over-year activity remained subdued nationally, with the South and West the only regions posting modest annual gains. Single‑family and condo/co‑op sales both declined for the month, although home prices continued to rise modestly on a year‑over‑year basis, underscoring the continued imbalance between supply and demand.

 

Home prices remained resilient despite weaker sales, with the national median rising 1.4% year over year to a record March level, supported by still-limited inventory. While inventory increased modestly and months’ supply edged higher, affordability remains under pressure as mortgage rates have moved materially higher since the onset of the Iran war. Buyer composition showed softening participation from first‑time and cash buyers, while investor activity increased and distressed sales remained minimal. Elevated rates and lackluster buyer demand are expected to weigh on market activity through the spring selling season, prompting NAR to sharply reduce its 2026 sales outlook and signaling continued downside risk to transaction volumes in the months ahead.

 

March wholesale prices rose less than expected as a war‑driven spike in energy prices lifted headline inflation without broadly spilling over into other goods or services, with core and super‑core measures showing cooling trends even as rising intermediate and transportation costs pose upside risks to PCE inflation ahead.

The March PPI report showed wholesale inflation rising less than expected, driven almost entirely by a sharp spike in energy prices linked to the Iran war. Headline PPI increased 0.5% month over month, below expectations, and 4.0% year over year, also under forecasts, even as it marked the strongest annual gain since early 2023. Nearly half of the monthly increase came from a surge in gasoline prices, while services were flat overall, aside from energy‑related increases in transportation and warehousing costs. This indicated that geopolitical energy shocks boosted headline inflation without broadly spilling over into other wholesale prices.

 

Goods inflation accelerated sharply due to energy, with prices jumping 1.6% for the month, led by large increases in gasoline, diesel, and other refined petroleum products, while food prices declined and helped offset some pressure. Importantly, prices for manufactured goods tied to data center buildouts and capital investment were unchanged, and core goods inflation remained modest. Services inflation stabilized, with rising transportation costs offset by declining trade margins, suggesting easing tariff pass‑through effects and a cooling trend across most professional and consumer services categories.

 

Underlying inflation measures improved notably, with core and super core PPI both coming in below expectations, reinforcing the view that energy shocks did not meaningfully propagate through the broader pricing structure. However, intermediate input costs surged, highlighting lingering inflation risks earlier in the production pipeline. Looking ahead, March wholesale price trends suggest PCE inflation will run hotter than February but remain contained for now, although rising logistics, transportation, and industrial costs tied to geopolitical disruptions pose upside risks to consumer inflation in the months ahead.

 

Weekly jobless claims dropped sharply below expectations due to holiday‑related volatility, while a modest, seasonal rise in continuing claims left overall labor market conditions stable with layoffs remaining limited.

Weekly jobless claims fell sharply to 207,000, well below expectations, reflecting holiday‑related volatility around Easter and reinforcing signs of labor market resilience, with claims remaining below year‑ago levels for the ninth straight week. While continuing claims rose modestly due largely to seasonal factors tied to New York City school spring break, they also remained below last year’s levels, and four‑week moving averages for both initial and continuing claims point to generally stable employment conditions with layoffs still limited despite short‑term fluctuations.

 

Markets rallied sharply as easing U.S.–Iran tensions and falling oil prices lifted equities to record highs, while Treasury yields edged lower and investors further delayed their expectations for the next Federal Reserve rate cut until mid‑2027.

Equity markets surged to record highs as easing U.S.–Iran tensions, declining oil prices, lower‑than‑expected jobless claims, and strong first‑quarter earnings expectations boosted investor sentiment. The Nasdaq led the rally, posting its longest winning streak since 1992 and gaining nearly 7% on the week, while the S&P 500 jumped more than 4% to break above the 7,100 level, with technology stocks outperforming and energy shares lagging amid falling crude prices.

 

At the same time, oil prices posted another volatile decline following optimism around a potential ceasefire extension and the partial reopening of the Strait of Hormuz, pushing both Brent and West Texas Intermediate (WTI) crude sharply lower, though gasoline prices remain significantly higher since the conflict began. Treasury yields edged modestly lower during the week on easing geopolitical risks, lower energy prices, and a softer PPI report, but remain well above pre‑conflict levels, and markets continue to price in no Fed rate cuts in 2026, with the next likely cut not expected until mid‑2027.

 

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DETAILED ANALYSIS:

Existing Home Sales – March Update: 

Overview

According to the NAR, existing home sales declined 3.6% in March to a seasonally adjusted annual rate of 3.98 million units, below market expectations of 4.05 million units and down from 4.13 million units in February. The March reading marked the lowest level since June, reflecting weaker buyer demand amid lower consumer confidence, softer job growth, and higher mortgage rates, while tight inventory continued to support home prices despite weaker volumes.

 

Regional Monthly Breakdown (MoM)

• Northeast: −8.5% to an annual rate of 430,000 units
• Midwest: −4.2% to an annual rate of 920,000 units
• South: −3.1% to an annual rate of 1.86 million units
• West: −1.3% to an annual rate of 770,000 units

 

Regional Year-over-Year Growth

• National: -1.0%
• Northeast: -23.2%
• Midwest: -3.2%
• South: +2.2%
• West: +1.3%

 

Single-Family and Condo/Co-Ops Sales

• Single-family homes: −3.5% MoM to a seasonally adjusted annual rate of 3.63 million units (−0.3% YoY); median price $412,400, up 1.3% YoY.
• Condominiums & co-ops: −5.4% MoM to a seasonally adjusted annual rate of 350,000 units (−7.9% YoY); median price $371,500, up 2.3% YoY.

 

Home Prices 

Nationally, the median existing‑home price rose 1.4% year over year to $408,800, marking the 33rd consecutive month of annual price gains and the highest March prices on record, supported by still‑limited inventory.

 

Regional median prices diverged:

• Northeast: $494,500, up 5.7% YoY
• Midwest: $315,500, up 4.9% YoY
• South: $362,600, up 0.8% YoY
• West: $613,400, down 1.3% YoY

 

 

 

Inventory and Supply

• Unsold inventory increased 3.0% MoM to 1.36 million units
• Inventory is up 2.3% YoY, but remains below historical norms
• Months’ supply of inventory (MSI): 4.1 months, up from 3.8 months in February and 4.0 months a year ago

 

Buyer Composition and Market Dynamics

• First-time buyers: 32% of sales (down from 34% last month; unchanged from one year ago)
• All‑cash sales: 27% of transactions (down from 31% last month; up slightly from 26% in March 2025)
• Investor purchases: 18% of transactions (up from 16% last month; up from 15% one year ago)
• Distressed sales (foreclosures/short sales): 2% (down from 3% last month and a year ago)
• Median time on market: 41 days (down from 47 days last month; up from 36 days in March 2025)

 

Mortgage Rates and Outlook

• Freddie Mac reported the average 30‑year fixed‑rate mortgage at 6.18% in March, down from 6.05% in February and 6.65% a year ago.
• Weekly average ending April 16, 2026: 6.30%.

 

Since the onset of the Iran war, rising interest rates have pushed mortgage rates materially higher, adding to ongoing affordability pressures in the housing market and risking any recovery during the spring selling season, typically the busiest period of the year for sellers. Lackluster buyer demand relative to the recent rise in housing inventory is expected to keep price growth under pressure in the months ahead.

 

Reflecting the rate‑ and affordability-driven slowdown, NAR reduced its 2026 existing home sales forecast to 4%, down from a prior projection of 14%, citing higher mortgage rates as a primary constraint on market activity.

 

PPI – March Update: 

The Bureau of Labor Statistics (BLS) reported that the Producer Price Index (PPI) for final demand increased 0.5% month over month in March, coming in below market expectations of a 1.1% increase. The March reading followed a revised 0.5% increase in February (down from an initially reported 0.7%) and a 0.6% gain in January. The March increase was driven entirely by higher goods prices (reflecting a sharp spike in energy prices, which accounted for roughly 43% of the overall 0.5% monthly increase and was largely driven by a 15.7% surge in gasoline prices tied to the Iran war). While services were flat overall for the month, transportation and warehousing costs increased, reflecting energy‑related pressures linked to the conflict. On a year‑over‑year basis, headline PPI rose 4.0%, below market expectations of 4.6%, though still marking the largest 12‑month increase since February 2023 and highlighting persistent upstream inflation pressures.

 

Goods Prices

Goods prices, including food and energy, surged 1.6% month over month in March, the largest increase since August 2023 and a sharp acceleration from February. The increase was overwhelmingly driven by energy prices, which jumped 8.5%, reflecting broad‑based gains across refined petroleum products.

 

Gasoline prices rose 15.7%, accounting for nearly half of the overall increase in final demand goods. Diesel fuel prices surged 42.0%, with additional upward pressure on jet fuel and home heating oil.  In contrast, food prices declined 0.3% month over month, partially offsetting energy‑driven price increases. Price declines were led by fresh and dry vegetables (‑10.7%) and egg prices (‑0.63%), while grains posted modest gains.

 

Prices for manufactured goods tied to data‑center build‑outs, including electronic computers and computer equipment, transformers, and power regulators, showed no price change in March, suggesting stable pricing across key capital‑investment inputs despite broader volatility in goods inflation.

 

Excluding food and energy, core goods prices increased a modest 0.2% month over month in March, following stronger gains earlier in the year.

 

Services Prices 

Service prices were unchanged month over month in March, marking a notable deceleration following gains earlier in the year.

 

Transportation and warehousing services increased 1.3%, driven by higher airline passenger services (+2.8%) and truck freight transportation, reflecting higher fuel costs. Services excluding trade, transportation, and warehousing rose just 0.1%, indicating cooling momentum across professional and consumer service categories.

 

Trade services prices declined 0.3%, as margins narrowed across wholesale and retail trade. Declines were led by a 6.0% drop in food and alcohol wholesaling margins, alongside weakness in fuels and lubricants retailing. With trade services prices now declining for a second consecutive month, the data may suggest that earlier tariff pass‑through effects are beginning to ease.

Overall, services inflation appeared to stabilize in March, with upward pressure largely concentrated in transportation‑related categories tied to energy prices.

 

Core and Super Core PPI

Underlying inflation measures showed clearer signs of cooling in March.

 

Core PPI (excluding food and energy) increased just 0.1% month over month, down from 0.3% in February (revised down from an initial 0.5%) and below market expectations of 0.4%. On a year‑over‑year basis, core PPI was unchanged at 3.8%, holding steady from February and below market expectations of 4.1%.

 

The super core PPI (excluding food, energy, and trade services) rose 0.2% month over month, below market expectations of 0.4%. On a year‑over‑year basis, super core PPI increased 3.6%, below market expectations of 3.8%.

 

Overall, March headline and core PPI readings were tamer than expected, as the sharp spike in energy prices did not flow through to other wholesale prices as much as feared. Despite this moderation in final demand prices, costs for processed goods for intermediate demand rose sharply, increasing 2.6% month over month in March, the largest monthly gain since May 2022, highlighting continued cost pressures earlier in the production pipeline.

 

Implications for PCE Inflation

March wholesale price trends closely mirrored March consumer price dynamics, reinforcing the view that upstream and downstream inflation pressures were broadly aligned during the month. As a result, the March PCE Price Index, due at the end of the month, is likely to come in hotter than February, even as core and super core PPI readings surprised to the downside.

 

Key PPI components feeding into core PCE showed mixed signals in March:

• Transportation‑related services rose alongside higher energy prices.
• Hospital care and portfolio management costs continued to increase at a moderate pace.
• Physician care, home health care, and trade margins remained subdued.
• Airfare prices increased, reversing some recent weakness.

 

Looking ahead, higher industrial input costs and rising transportation and logistics expenses tied to war‑related disruptions in production and global shipping are likely to place upward pressure on wholesale prices, with increasing spillover to consumer prices and PCE inflation measures in the months ahead. While near‑term pass‑through to core inflation has been limited, persistent geopolitical supply disruptions represent an upside risk as cost pressures continue to work their way through the inflation pipeline.

 

Weekly Jobless Claims – Week Ending April 11:

The Labor Department reported that initial jobless claims fell by 11,000 to 207,000 for the week ending April 11, down from a revised 218,000 the prior week and below market expectations of 213,000. This marked the largest weekly decline since mid‑February and was largely attributed to holiday‑related volatility surrounding Easter. Claims remained below the comparable level from a year ago for the ninth consecutive week, underscoring continued labor market resilience. The four‑week moving average edged up slightly by 500 to 209,750, suggesting that layoffs remain limited despite week‑to‑week noise.

 

Continuing claims, which reflect the number of individuals receiving unemployment benefits, rose by 31,000 to 1.818 million for the week ending April 4, up from a revised 1.787 million and above expectations of 1.810 million. The increase was largely driven by applications related to the April 2–10 spring break for New York City public schools and remained below year‑ago levels. Meanwhile, the four‑week moving average of continuing claims declined by 8,250 to 1.813 million, reinforcing signs of a generally stable labor market.

 

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WEEKLY MARKET ANALYSIS:

Equity Market

Equity markets surged to record highs, driven by easing US–Iran tensions following news of a potential extended ceasefire and Iran’s limited reopening of the Strait of Hormuz, declining oil prices, lower‑than‑expected initial jobless claims, and strong first‑quarter earnings expectations. The Nasdaq led the rally, rising roughly 6.8% on the week and posting its 13th consecutive daily gain—the longest winning streak since 1992—while the S&P 500 jumped more than 4% to break above the 7,100 level. Technology stocks outperformed broadly, while energy shares lagged amid falling oil prices.

 

Weekly and Year-To-Date (YTD) Performance Highlights:

• Nasdaq: +6.84% (weekly) & +5.28% (YTD), closing at 24,468
• S&P 500: +4.54% (weekly) & +4.10% (YTD), ending at 7,126
• Dow Jones Industrial Average: +3.19% (weekly) & +2.88% (YTD), closing at 49,447
• Russell 2000: +5.56% (weekly) & +11.89% (YTD), ending at 2,777

 

Oil Market

For the week ending April 17, 2026, crude oil prices experienced another volatile decline following their largest weekly drop since April 2020 in the prior week. The pullback was driven by optimism around a potential extension of the ceasefire and the partial reopening of the Strait of Hormuz. Brent crude fell $4.82, or 5.1%, from $95.20 to $90.38 per barrel, while West Texas Intermediate (WTI) plunged $12.72, or 13.2%, from $96.57 to $83.85 per barrel.

 

U.S. average gasoline prices tracked by AAA declined modestly by 1.86%, or roughly $0.08 per gallon, falling from $4.135 to $4.058. Despite the recent easing, average gasoline prices have risen $1.07, or 36.0%, since the Middle East conflict began in late February 2026, up from $2.984 per gallon.

 

Treasury Market

Treasury yields edged slightly lower across maturities beyond six months during the week, driven by easing geopolitical tensions in the Middle East, lower oil prices, and a weaker‑than‑expected PPI report. The 10‑year Treasury yield ended the week at 4.26%, down 5 basis points, while the 5‑year yield declined 10 basis points to 3.84%.

 

Despite the recent pullback, Treasury yields have risen sharply since the onset of the conflict, with longer maturities experiencing the largest moves. Since then, the 2‑year, 5‑year, and 10‑year Treasury yields have increased by approximately 33, 33, and 29 basis points, respectively.

 

Key Treasury Yield Movements:

• 2-year yield: 3.71% (-0.10%)
• 5-year yield: 3.84% (-0.10%)
• 10-year yield: 4.26% (-0.05%)

 

Rate Cut Expectations

Unlike the prior week, market expectations shifted, with investors continuing to price in no Federal Reserve rate cuts in 2026 but one rate cut in June 2027 with near‑certain probability. That said, there remains a meaningful chance of a rate cut between December 2026 and April 2027, with implied probabilities ranging from roughly 60% to 79% across that window.

 

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NEXT WEEK’S ECONOMIC CALENDAR:

Key scheduled releases include:

• 4/21 (Tuesday)
  • Retail Sales for March
  • Pending Home Sales for March
• 4/23 (Thursday)
  • Weekly Initial Claims and Continuing Claims

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For a visual representation of this week’s economic review, you can view or download the slide deck here: 04.17.2026 CBC Weekly Economic Update Slides

Mark Yoon, CFA CPA

EVP & CFO of Commercial Bank of California

 

Thomas McCullough

EVP of Commercial Bank of California

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