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Equities Rise on Latest Inflation Reading
Equity markets gained last week as a consumer inflation report continued to cool to the slowest pace since May 2021. Global equities (represented by the MSCI All Country World Index) were up 1.35%, and domestic stocks (represented by the S&P 500 Index) were up 0.82%.
Consumer Price Index
The US Consumer Price Index (CPI) report provided encouraging news that inflation continued to moderate through March. The headline rate fell to 5.0% year-over-year, down from its peak last June of 9.1%. Core CPI (excludes food and energy) rose at an annual rate of 5.6% which is lower than its September peak of 6.6% but still far from the Fed’s 2% long-term target rate. The separate Producer Price Index (PPI) report released last week showed wholesale inflation slowing to its lowest annual rate in over two years at 2.8%. Core PPI declined for the first time since April 2020 on a month-over-month basis in March.
Retail sales data for March was also released last week. While consumer spending has been relatively resilient along with the labor market, March retail sales data came in under expectations with a month-over-month drop of -1% in retail spending. Weekly unemployment claims also ticked up more than consensus estimates to 239,000. However, this reading still sits below most of the levels seen in March.
Earnings season kicked off with major US banks, such as JPMorgan Chase and Wells Fargo, reporting results last Friday. While these banks beat consensus estimates, analysts are expecting an average earnings decline of -6.5% for S&P 500 companies.
This week is a relatively light week on the economic data calendar, but the main releases will be focused around the housing market with the National Association of Home Builders’ housing Market Index, housing starts, and existing home sales for March slated to come out. Earnings season will also pick up with more big name companies like Johnson & Johnson, Netflix, and United Airlines all set to report quarterly results.
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.