Weekly Market Commentary May 13th to May 17th 2024

The Consumer Price Index (CPI) cooled for the first time in six months. The 0.3% rise in April was a tenth lower than the prior month’s reading, as was the 3.4% annualized rate of inflation. The Core CPI (excluding food and energy) was higher by 3.6% on a year-on-year basis (from 3.8% prior.) While the deviation was modest, it was welcomed news for investors and Fed watchers after multiple upside misses on the report earlier in the year. Prices of vehicle insurance, apparel, energy and gasoline climbed, while new and used car and truck prices continued to slip.

The Producer Price Index (PPI) was higher than consensus in April (0.5% vs. 0.3%), but the unanticipated rise was offset by a downward revision to previously reported March data. The year-on-year headline reading was modestly higher than the prior month at 2.2% (from 2.1%) while Core PPI was 2.4%, in line with the prior reading. Trade Services were a key component of the rise, posting the largest gain in 10 months.

Retail Sales in April were flat, well below the 0.4% consensus estimate and 0.7% prior reading. March sales were also revised lower by a tenth to 0.6%. Non-store retailers and motor vehicles and parts sales were negative in the month. Gasoline sales were the primary area of spending increases. Production cuts by OPEC, rising geopolitical conflict tensions and the upcoming summer travel season are all tailwinds to keep gasoline prices moving higher, a factor we will be focusing on in subsequent data releases.

U.S. equity investors bid up markets into record territory, with a notable new milestone for the Dow Jones Industrial Average closing above 40,000 for the first time. The S&P 500 closed the week higher by 1.5% at 5,303. The NASDAQ Composite advanced 2.1%. The yield on the 10-Year U.S. Treasury pulled back modestly, closing the final trading session at 4.42%.

Key economic releases next week include Durable Goods Orders, Existing and New Home Sales, and Consumer Sentiment, as well as a release of the latest Fed meeting minutes.