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Stocks Rise and Yields Fall Following a Positive Inflation Report
The S&P 500 hit a new all-time high last week as inflation worries eased. Global equities (represented by the MSCI All Country World Index) were up 1.73%, and domestic stocks (represented by the S&P 500 Index) were up 1.60%.
Consumer Price Index (CPI)
The major economic headline of the week was Wednesday’s Consumer Price Index (CPI) reading for April. For the month, CPI rose 0.3%, slowing from March’s 0.4% increase. On a year-over-year basis, headline CPI rose 3.4%, and core CPI rose 3.6%, the lowest reading since April 2021. Services prices, the main driver of core inflation in the past months, eased slightly for the month, and goods prices continued to decline.
Retail Sales
The theme of bad economic news being good news for markets continued with Thursday’s release of retail sales. Retail sales in April were flat while consensus expectations were for a 0.4% gain. This was also followed by two consecutive strong months of retail sales gains. The report indicated a potential slowdown of consumers’ discretionary spending as non-store retailer sales fell 1.20%.
10-Year Treasury Rate
With the latest inflation report, markets’ expectations for rate cuts this year improved leading to a shift in bond yields last week. The US 10-year treasury rate ended the week around 4.42%, dropping from its recent 2024 high of around 4.70% at the end of April.
Looking Forward
This week the FOMC minutes from their April 30th – May 1st meeting will be released. Investors will look for more insight and language changes from policymakers around potential rate cuts. Markets widely expect rate cuts to occur this year but are looking for more clarity as to when they will begin.
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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