Weekly Market Commentary April 8th to April 12th 2024

The anticipated June interest rate cut has just been pushed out to September after hotter than expected inflation numbers released on Wednesday. The Consumer Price Index (CPI) for March showed a 0.4% increase from last month and a 3.5% increase from last year. Core CPI, which strips out volatile items like food and energy, rose 0.4% from last month and 3.8% from last year. Each reading was 10bps above expectations and shows that consumer prices are still sticky, causing investors to temper their rate cut expectations.

The Producer Price Index (PPI) was more of a mixed bag with cooler month-over-month results and hotter year-over-year results. The month-over-month increase for both PPI and Core PPI was 0.2%, lower than last month’s reading. The year-over-year increase was 2.1% for headline PPI and 2.4% for core PPI, both higher than last month’s reading. Ultimately, PPI did not make much of a market impact, but it reaffirmed the notion of elevated inflation remaining persistent.

Sticky inflation factored in to the uncertainty of the Federal Open Market Committee members that was noted in the FOMC minutes release last week. It was stated that recent data did not increase their confidence that inflation is moving sustainably down to 2%. They also highlighted that geopolitical turmoil and rising energy costs remain risks that inflation could push higher.

The equity markets saw a meaningful decline last week as yields rose. The Dow Jones Industrials led the decline finishing down 2.4% to 37,983, the S&P 500 fell 1.6% to 5,123, and the Nasdaq fell 0.5% to 16,175. The 2-Year U.S. Treasury yield rose 14bps to 4.89% while the 10-Year rose 11bps to 4.52%, a 37bp inversion.

Key economic releases in the upcoming week will be Retail Sales and Existing Home Sales along with Housing Starts and Permits.