August 14, 2022

Weekly Market Commentary August 8th to August 12th 2022

The most important indicator to come out this week was the Consumer Price Index inflation gauge. It registered lower than expectations, at 8.5% YoY with 0% monthly growth. A 7.7% decline in gasoline prices was the main cause of the inflation miss. When stripping out the volatile prices of food and energy, Core CPI rose 0.3% from last month and 5.9% from a year ago. Price pressures remained evident in the housing and health care spaces, while used car prices have begun to trend downwards.

Producer Price inflation was also released. Wholesale prices of goods fell 0.5% from last month. On an annual basis, prices rose 9.8%, compared to 11.3% last month. This was driven by energy, as Core Producer Prices rose 0.2%. China’s Producer Price Inflation also came in below expectations, which is crucial because so many of the goods we buy are produced there.

NFIB’s Small Business Optimism Survey remains sluggish, but came in at 89.9, slightly higher than survey estimates and last month’s reading which were both 89.5. The average reading of the survey in its 48-year history is 98.

In the labor market, Jobless Claims came in slightly better than expected at 262,000, and last week’s figure was revised downwards by 12,000 to 248,000. Elsewhere, the University of Michigan’s Consumer Sentiment survey showed that consumers are still negative, but less so than last month. The Expectations gauge rose from 48.5 to 54.9, buoyed by strong jobs growth and perhaps signs of falling inflation pressures.

Markets rallied this week amid the soft inflation data. The S&P 500 rose 3.3% to 4,280, while the Nasdaq was up 3.1% to finish the week at 13,047. The yield on the U.S. 10-Year Treasury was flat on the week at 2.84%, while the 2-year yield rose slightly to 3.25%, reflecting an inverted yield curve that tends to serve as a sign of a weakening economy.

Next week’s important releases include Retail Sales, housing data including Building Permits and Housing Starts, Industrial Production, and a few regional manufacturing surveys.

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