Market Instability Continues…..

In an all-to-familiar theme, U.S. equities shed early gains to finish mixed, adding to the volatility that has sent the major indices to levels not seen in over a year. The moves came following another inflation report that showed wholesale prices continued to rise, and expectations of an aggressive Fed amid the backdrop of slowing economic growth has been a major contributor to the volatility, along with the lock-downs in China, the ongoing war in Ukraine, rising interest rates, and a strong U.S. dollar. Earnings season continued to head into the sunset, with Dow member Walt Disney posting mixed results and offering cautious guidance, while Tapestry topped profit projections on strong North American sales, and Rivian Automotive posted a smaller-than-expected loss and reaffirmed its full-year targets. In other economic news, initial jobless claims ticked higher but continuing claims fell to a new low not seen in 50 years. Treasuries rose to put downside pressure on yields, and the U.S. dollar was back in rally mode, while crude oil prices were modestly higher in choppy action, and gold traded to the downside. Europe finished with widespread losses and Asia was broadly lower amid the uneasy global backdrop.

The Dow Jones Industrial Average fell 104 points (0.3%) to 31,730 and the S&P 500 Index decreased 5 points (0.1%) to 3,930, while the Nasdaq Composite nudged 7 points (0.1%) higher to 11,371. In heavy volume, 6.2 billion shares of NYSE-listed stocks were traded, and 6.6 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.42 to $106.13 per barrel. Elsewhere, the gold spot price traded $30.60 lower to $1,823.10 per ounce, and the Dollar Index rallied 1.0% to 104.82.

The Producer Price Index (PPI), showed prices at the wholesale level in April rose 0.5% month-over-month (m/m), matching the Bloomberg consensus estimate, and below March’s upwardly-revised 1.6% increase. However, the core rate, which excludes food and energy, gained 0.4% m/m, below estimates of a 0.7% rise and south of the prior month’s upwardly-adjusted 1.2% increase. Y/Y, the headline rate was 11.0% higher, down from the prior month’s upwardly-adjusted 11.5% rise, and above expectations of a 10.7% gain. The core PPI increased 8.8% y/y last month, south of estimates calling for an 8.9% gain and well below March’s upwardly-adjusted 9.6% increase.

Weekly initial jobless claims came in at a level of 203,000 for the week ended May 7, versus estimates calling for 193,000, and versus the prior week’s upwardly-revised 202,000 level. The four-week moving average rose by 4,250 to 192,750, and continuing claims for the week ended April 30 fell by 44,000 to 1,343,000, versus estimates of 1,372,000. The four-week moving average of continuing claims dropped by 32,750 to 1,385,000.

Treasuries are higher following the inflation and jobs data, with yields paring a recent spike and the markets anticipating tighter Fed monetary policy following last week’s 50 basis point (bp) rate hike.

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