Mid-Week Market Minute 5.15.24

CPI Report Slightly Below Expectations; Retail Sales Flat

Stocks continued to move higher this week as several markets around the world hovered around 52-week highs. In fixed income, bond prices rose as Treasury yields declined following a better-than-expected inflation print. Elsewhere, GameStop and AMC Entertainment saw their shares more than double this week on a pure speculation trade after Roaring Kitty, the man who inspired the GameStop short squeeze from 2021, posted online for the first time in nearly three years.

The Consumer Price Index (CPI) report on Wednesday morning showed headline prices rose 0.3% from March to April, slightly below expectations for a 0.4% increase. Falling oil prices in April helped take some pressure off the headline number, but core prices, particularly services, remain elevated. Average hourly earnings, a widely followed component of wage inflation, showed some moderation from March, slowing from 0.6% to 0.5%. Separately, retail sales came in flat for April against expectations for a 0.4% jump. This comes after a stronger-than-expected number for March, where retail sales rose 0.7%. All told, this could be an indicator the U.S. consumer is starting to cut back on spending as excess savings are falling and the labor market is softening. 

Looking ahead, the markets will remain hyper-sensitive to changes in future interest-rate expectations as the futures markets continue to expect between one and two 25 bps rate cuts between now and the end of the year. Expectations are for next meeting in June to be a non-event from a policy standpoint, with the first real chance of a rate cut in either July or September. However, investors will pay close attention to the Summary of Economic Projections in June, where the central bank will provide the markets with its long-term forecasts for interest rates, inflation, and economic growth. 

Source: GSAM, CNBC, JPMorgan

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