US Economy: Weekly Commentary – April 20, 2026

US Market Review

Yields fell as rate-cut expectations rose, amid debt concerns. Equities gained, led by the Magnificent 7. The dollar weakened, oil dropped amid easing risk, while gold and Bitcoin rose.

Overall, bond yields declined significantly over the week. The mid-section of the yield curve outperformed, while longer maturities lagged; however, yields fell across the entire curve. Market expectations for interest rate cuts increased notably, with investors assigning a 70% probability to at least one rate reduction this year. The yield on the 2-year Treasury note dropped below the federal funds rate for the first time in over a month. At the same time, longer-term risks remain in focus, as former Treasury Secretary Henry Paulson warned about the potential for a future decline in demand for U.S. Treasuries due to the rising federal debt burden. He highlighted the need for a contingency “break-the-glass” plan, noting that a scenario of higher yields driven by debt concerns could increase borrowing costs and create a negative feedback loop for government finances, potentially requiring Federal Reserve intervention in extreme conditions.

U.S. equity markets ended the week higher across all sectors. Micro-cap stocks led gains with a 6.80% increase, followed by small-cap stocks at 5.54% and large-cap stocks at 4.50%. The “Magnificent 7” rose 8.63%. This marks the third consecutive week in which the S&P 500 has advanced by 3% or more; a pattern last observed in June 2020, September 1982, and September 1940. At the sector level, all sectors posted gains except energy, which declined 3.40%, and utilities, which fell 1.70%.

In currency and commodity markets, the U.S. dollar weakened by 0.34% against the euro. WTI crude oil dropped 10.52% after Iran indicated that the Strait of Hormuz would remain open during the ceasefire, easing concerns about a major supply disruption along a route that carries roughly one-fifth of global oil supply. This development reduced the geopolitical risk premium that had been priced in during the conflict, although prices remain relatively elevated due to ongoing uncertainty and a gradual recovery in shipping activity. Gold rose 1.64%, while Bitcoin gained 6.25% over the week.

US Market Views Synopsis

Manufacturing fell 0.1% MoM. Industrial production dropped 0.5% MoM. Housing sales declined 3.6% MoM. YoY trends remain mildly positive. High rates and weak demand persist.

U.S. economic data for March shows weaker monthly activity but some longer-term stability. Manufacturing output fell 0.1% MoM after rising 0.4% MoM in February, with sharp declines in motor vehicles (-3.7% MoM) and smaller drops in machinery and metals. Overall industrial production fell 0.5% MoM due to lower mining (-1.2% MoM) and utilities (-2.3% MoM). However, manufacturing was still up 0.5% YoY and grew at a 3.0% annualized rate in Q1, suggesting a mild underlying expansion. In housing, existing home sales dropped 3.6% MoM to 3.98 million SAAR, the weakest in nine months, while prices rose 1.4% YoY to $408,800 despite weaker demand and high mortgage rates. Inventory improved slightly but remains low. Overall, both manufacturing and housing show short-term weakness on a MoM basis, but YoY trends are more stable, with ongoing pressure from higher borrowing costs and economic uncertainty.

Industrial Production

U.S. manufacturing output fell 0.1% in March, led by autos and mining declines, with industrial production down 0.5%, though broader trends remain mildly positive.

U.S. manufacturing output unexpectedly slipped in March, falling 0.1% after an upwardly revised 0.4% increase in February, according to Federal Reserve data, missing expectations for a 0.1% gain and signalling a pause in recent momentum. The decline was led by motor vehicles, where production dropped 3.7% after a strong 2.6% rise in February, alongside weaker activity in primary metals, machinery, and furniture. Durable goods output fell 0.2%, while nondurable goods edged down 0.1%, although petroleum, coal, plastics, and rubber products recorded gains that partially offset broader weakness. Overall industrial production declined 0.5% on the month, weighed down by a 1.2% drop in mining and a 2.3% decline in utilities as seasonal heating demand faded. Energy-related output also softened, including lower oil and gas drilling activity, reflecting caution among producers amid elevated price volatility. Despite the monthly contraction, the broader trend is less negative, as February’s data were revised higher and manufacturing output still rose 0.5% YoY and expanded at a 3.0% annualized rate in the first quarter. Capacity utilization eased to 75.7%, below long-term averages, indicating remaining slack in the industrial sector. The data highlight uneven momentum across manufacturing, with recent volatility influenced by shifting energy conditions, lingering tariff-related uncertainty, and geopolitical tensions affecting business investment decisions.

We expect lower manufacturing momentum and higher volatility ahead as output softens and industrial production weakens amid ongoing uncertainty.

Housing Market

U.S. existing home sales declined in March compared with the prior month, while median prices continued to rise year over year amid persistently tight supply and weaker demand conditions.

U.S. existing home sales declined 3.6% MoM in March, a sharper-than-expected drop versus the consensus forecast of -0.7% and a revised +2.7% MoM gain in February, marking one of the largest monthly declines since late 2022. On a seasonally adjusted annualised basis, sales fell to 3.98 million units, the weakest level in nine months and close to post-crisis lows, despite earlier gains in affordability as lower mortgage rates briefly supported demand. The median existing home price rose 1.4% YoY to $408,800, highlighting continued price resilience even as transaction volumes weakened. Inventory increased modestly to a four-month high, though it remains historically constrained, while sales declined across all regions with pronounced softness in lower-priced segments. Elevated uncertainty, including geopolitical tensions that have pushed mortgage rates higher and weighed on sentiment, has further dampened activity. Against this backdrop, the National Association of Realtors cut its 2026 sales growth outlook to 4% from 14%, signalling that housing market conditions are likely to remain subdued in the near term despite expectations of gradual stabilisation ahead.

We expect that the U.S. housing market will remain under pressure as weak demand and high borrowing costs continue to outweigh limited supply support.