Weekly Market Commentary April 11th to April 15th 2022
After a quiet period for economic data, The Consumer Price Index inflation report was hotly anticipated. The data showed that inflation was 8.4% annually, which was close to analyst expectations. In the last month, prices rose 1.2%, driven by skyrocketing food and energy prices. Tighter supplies due to the Russia-Ukraine war and resulting sanctions have contributed to these latest pricing pressures. Elsewhere, used car prices fell -3.8%, signaling that consumers are facing “sticker shock”. Rent continued to jump, rising 0.4% over the month.
Producer Prices rose 11.2%, suggesting that manufacturers are not able to pass on all the price increases from their supply chain to consumers. Prices were up 1.4% in the last month alone, while prices excluding food and energy accelerated 7% annually. U.S. export prices rose a staggering 18.8% annually and 4.5% from last month. Agricultural exports and energy powered the jaw-dropping figure.
Retail Sales were disappointing. They rose 0.5%, slightly below expectations, and all the increase came from higher prices. E-commerce sales are regressing from pandemic-era heights.
Consumer Sentiment, as reported by the University of Michigan Survey, surprised to the upside with a 65.7 reading vs. 59.4 expected. Inflation expectations remain elevated, but consumers were bullish on the labor market, expecting wage growth of over 5% this year.
Industrial Production rose 0.9% monthly, smashing analysts’ estimates of 0.4%. Last month’s growth was revised upwards from 0.5% to 0.9%, adding to the good news. Capacity Utilization of factories edged upwards, and a state survey out of New York showed that factories were receiving tons of new orders, although supply chain pressures were still present. Manufacturing is keeping the economy strong despite concerns elsewhere, and myriad geopolitical concerns are likely boosting the need for U.S. production.
In a shortened trading week due to Friday’s holiday, the S&P 500 dropped -2.2% to finish at 4,392. The NASDAQ was off -2.5% to 13,351, pressured by a continued rise in interest rates. The Dow Jones industrial average outperformed both, falling only -0.8% to 34,451 due to its more defensive, blue-chip positioning. The yield on the 10-Year U.S. Treasury ended the week at 2.83%, up 0.12% from last week.
Next week’s slate of economic releases is heavy on housing data. We will get a look at Housing Starts, Existing Home Sales, and Building Permits. Weekly Jobless Claims and the Philadelphia Fed’s business survey round out the week.