Inflation Data On Deck

By Nicholas Jasinski |  Tuesday, May 10 Inflation Rescue? Stocks had a choppy day of trading, with markets fighting to bounce back from the recent sharp declines. By the close, the Nasdaq Composite was up 1%, the S&P 500 had added about 0.2%, and the Dow Jones Industrial Average had slipped 0.3%. All three indexes were coming off their worst three-day stretches since 2020. A pullback in bond yields helped the tech-heavy Nasdaq outperform today. The yield on the 10-year U.S. Treasury note fell back below 3%, after jumping above 3.1% on Friday. That's a psychologically important round number that investors have paid close attention to this year. It's a roughly equivalent yield to where the Federal Reserve has signaled it will increase its benchmark interest rate to in 2022. As Chairman Jerome Powell likes to remind Fed watchers, the path of policy will depend on the data between now and then. Tomorrow we'll get a look at the latest inflation numbers for the U.S. economy. The Bureau of Labor Statistics will report the consumer price index for April before the market opens. Economists on average expect to see a 0.3% increase in the index since last month, according to FactSet, for an 8.1% year-over-year rise. Excluding food and energy components, the core CPI is expected to have gained 0.4% in April, for a 5.9% year-over-year jump. Those would both be slower annual paces of price growth than the 8.5% overall CPI and 6.5% core CPI readings in March. If economists are right, expect to hear plenty of debate about whether inflation has peaked. That doesn't mean going back to the Fed's 2% target anytime soon, but if the trend is at least in the right direction, there will be more optimism to go around. That's yet another commodity that has been in short supply in recent weeks. "Who knows how this week will play out, but stock investors would certainly welcome a continuation of better news on the inflation front and a stall in the recent yield rout," wrote James Paulsen, chief investment strategist at Leuthold Group. With stock indexes at their lowest levels of the year, it might not take much good news to see at least a temporary bounce. But investors aren't out of the woods yet. Tightening Fed policy still dominates. More on that below.

 

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