Stocks around the globe stabilized in early trading this week after weathering a steep sell-off last week, fueled by the ongoing uncertainty surrounding inflation and the future path of monetary policy. International developed and emerging markets lead the way with the MSCI Emerging Markets Index more than 2.5% higher mid-week. In China, improving COVID-19 trends coupled with prospects for more relaxed regulation on big-tech names helped bolster investor sentiment. In the Eurozone, economic growth came in stronger than expected for the first quarter despite the ongoing headwinds from the conflict in Ukraine. In the U.S., stocks mounted a comeback as well with the S&P 500, about 1.5% higher despite sharp sell-offs in retailers like Walmart (WMT) and Target (TGT).
On the data front, the U.S. consumer remains resilient as core retail sales came in firmly above consensus. Industrial production rose a better-than-expected 1.1% in April while business inventories increased by 2%. In housing, the NAHB housing market index fell significantly below consensus expectations in May, falling back to roughly pre-pandemic levels. In addition, housing starts declined 0.2% in April and were revised lower for March, roughly in line with expectations.
Inflation remains at the forefront, as gas prices have steadily marched higher, contributing to inflationary pressures seen across the economy. The national average for a gallon of regular gasoline hit a record $4.567 on Wednesday, according to AAA. Prices are 48 cents more than a month ago, and $1.52 more than what consumers paid last year. The yield on the benchmark 10-year Treasury note topped 3% on Wednesday morning as investors weighed the prospects of tighter monetary policy to curb inflation.
Source: GSAM, CNBC, JPMorgan
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