Bulls Just Can’t Get a Break…..
After looking as if U.S. equities may get a reprieve from the recent selloff, the markets turned lower midday to finish in the red in volatile trading in the wake of another hotter-than-expected consumer price inflation report. Although the headline figure came in higher than anticipated, prices did moderate slightly from the 41-year high posted in the month prior. The markets also grappled with the monetary policy implications of the report, as well as the omnipresent worries over higher interest rates, the strong dollar, and slowing economic growth. Moreover, the ongoing war in Ukraine remained a drag on sentiment, while the lockdowns in China continue to cloud the global economic outlook. Treasuries were mixed following the inflation data, and the U.S. dollar was little changed in choppy action. Crude oil prices rebounded from yesterday’s drop, and gold gained ground. Earnings remained in focus, with Electronic Arts rising after topping earnings estimates, while Coinbase and Wendy’s fell after missing expectations. Asia finished mixed and Europe showed some resiliency in the face of the aforementioned headwinds to end mostly higher.
The Dow Jones Industrial Average fell 327 points (1.0%) to 31,834, the S&P 500 Index decreased 66 points (1.7%) to 3,935, and the Nasdaq Composite declined 373 points (3.2%) to 11,364. In heavy volume, 5.8 billion shares of NYSE-listed stocks were traded, and 6.0 billion shares changed hands on the Nasdaq. WTI crude oil jumped $5.95 to $105.71 per barrel. Elsewhere, the gold spot price traded $12.70 higher to $1,853.70 per ounce, and the Dollar Index was flat at 103.98.
The Consumer Price Index (CPI) rose 0.3% month-over-month (m/m) in April, above the Bloomberg consensus estimate calling for a 0.2% gain, and compared to March’s unrevised 1.2% increase. The core rate, which strips out food and energy, increased 0.6% m/m, topping forecasts of a 0.4% rise and compared to March’s unadjusted 0.3% increase. Compared to last year, prices were 8.3% higher for the headline rate, above estimates of an 8.1% increase but a deceleration from the prior month’s unrevised 8.5% rise. The core rate was up 6.2% y/y, north of projections of a 6.0% gain, and down from March’s unrevised 6.5% rise.
The Bureau of Labor Statistics (BLS) said increases for shelter, food, airline fares, and new vehicles were the largest contributors to the hotter-than-expected report. However, energy prices declined, along with prices for apparel, communication, and used vehicles.
The MBA Mortgage Application Index rose 2.0% last week, following the prior week’s increase of 2.5%. The second-straight weekly increase came as a 2.0% drop in the Refinance Index was more than offset by 4.5% gain in the Purchase Index. The average 30-year mortgage rate resumed its jump, rising 17 basis points (bps) to 5.53%, up 242 bps versus a year ago.
The Consumer Price Index (CPI) rose 0.3% month-over-month (m/m) in April, above the Bloomberg consensus estimate calling for a 0.2% gain, and compared to March’s unrevised 1.2% increase. The core rate, which strips out food and energy, increased 0.6% m/m, topping forecasts of a 0.4% rise and compared to March’s unadjusted 0.3% increase. Compared to last year, prices were 8.3% higher for the headline rate, above estimates of an 8.1% increase but a deceleration from the prior month’s unrevised 8.5% rise. The core rate was up 6.2% y/y, north of projections of a 6.0% gain, and down from March’s unrevised 6.5% rise.
The Bureau of Labor Statistics (BLS) said increases for shelter, food, airline fares, and new vehicles were the largest contributors to the hotter-than-expected report. However, energy prices declined, along with prices for apparel, communication, and used vehicles.
The MBA Mortgage Application Index rose 2.0% last week, following the prior week’s increase of 2.5%. The second-straight weekly increase came as a 2.0% drop in the Refinance Index was more than offset by 4.5% gain in the Purchase Index. The average 30-year mortgage rate resumed its jump, rising 17 basis points (bps) to 5.53%, up 242 bps versus a year ago.
Treasuries were mixed after a spike in yields following the inflation data and as the markets brace for tighter Fed monetary policy following last week’s 50 bp rate hike, which Schwab’s Liz Ann Sonders discusses in her latest article, following the inflation data and as the markets brace for tighter Fed monetary policy following last week’s 50 bp rate hike, which Schwab’s Liz Ann Sonders discusses in her latest article.
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