Weekly Market Commentary May 8th to May 12th 2023

The much-anticipated Consumer Price Index (CPI) was reported this week showing an easing on a year-on-year basis to 4.9%. The headline reading was modestly below consensus estimates of 5.0% and the tenth consecutive monthly decline. A rise in housing costs, used vehicles and gasoline prices were the key drivers of continued inflation.

Producer Prices (PPI) rose less than anticipated as well, higher by 2.3% on a year-on-year basis versus the 2.5% estimate and 2.7% reading in March. Falling commodity prices and improved supply chains led to the slowest pace increase since early 2021. The vast majority of the positive inflation figure came from services, specifically food wholesaling, health care-related and financial services.

The game of chicken relating to the debt ceiling remained in full swing this week in Washington, with the majority of input supporting the case that a default is improbable and would have disastrous global financial repercussions. We expect both sides of the aisle to reach some compromise to avoid such an event.

The S&P 500 closed the week modestly lower by 0.3%, Dow Jones Industrial Average -1.1% and the Nasdaq Composite advanced marginally by 0.4%. The yield on the 10-Year U.S. Treasury finished the week roughly where it started at 3.47% after trading in a fairly tight range of 3.35-3.52%.

Key economic data releases next week include Retail Sales, Housing Starts and Permits, and Existing Home Sales.