The indexes retreated this week, with investors spooked by ongoing inflationary fears. The Dow and the S&P held up the best. Friday saw all 4 indexes gaining, with the Russell small caps and the NASDAQ leading.
Volatility: The VIX rose 12.3% this week, rising as high as $27.70, before ending the week at $18.69.
Market Breadth: 9 out of 30 DOW stocks rose this week, vs. 22 last week. 30% of the S&P 500 rose, vs. 62% last week.
Economic News: “Initial claims for state unemployment benefits totaled a seasonally adjusted 473,000 for the week ended May 8, compared to 507,000 in the prior week, the Labor Department said on Thursday.
In another report on Thursday, the Labor Department said its producer price index for final demand rose 0.6% in April after surging 1.0% in March. In the 12 months through April, the PPI shot up 6.2%. That was the biggest year-on-year rise since the series was revamped in 2010 and followed a 4.2% jump in March.
The government reported on Wednesday that consumer prices increased by the most in nearly 12 years in April, reflecting bottlenecks in the supply chain and strong demand for tourism-related services as the economy reopens.
Signs that inflation is heating have sparked a selloff on Wall Street as investors fear the Federal Reserve could raise interest rates sooner than expected. But Fed Vice Chair Richard Clarida said on Wednesday it would be “some time” before the economy is healed enough for the U.S. central bank to consider scaling back its support.” (Reuters)
Treasury yields slid on Friday after U.S. retail sales unexpectedly stalled in April as the boost from government stimulus checks faded and bond investors heeded the Federal Reserve’s view that a jump in inflation will be temporary.
The yield on benchmark 10-year U.S. Treasury notes fell 2.4 basis points to 1.644%, roughly midpoint of a trading range its held after briefly spiking above 1.7% in mid-March.
The unchanged reading in retail sales last month followed a 10.7% surge in March, which was revised upward on Friday from a previously reported 9.7% increase, the Commerce Department said.
The weak retail sales curbed long-term fears of inflation, despite a solid increase in U.S. import prices in April that Labor Department data on Friday also showed.
A separate Fed report on Friday showed manufacturing output rose moderately in April, with motor vehicle production declining amid a global semiconductor shortage.
Part of the jump in year-over-year consumer price data this week reflected a comparison with weak readings a year ago during the economic downturn caused by the pandemic.” (Reuters)
“The University of Michigan’s consumer survey’s two inflation expectations indexes both surged in preliminary May data released Friday. The measure that gauges near-term inflation expectations popped to 4.6 percent from 3.4 percent. A closely followed index that traces expectations for the next five years rose less, but hit its highest level in a decade, jumping to 3.1 percent from 2.7 percent in April.” (NY TIMES)
Week Ahead Highlights: There will be several Housing-related reports out next week. We’ll also get a look at the minutes from the Fed’s last meeting.
Next Week’s US Economic Reports:
Sectors: The Consumer Staples sector led this week, while the Consumer Discretionary sector lagged.
Futures: WTI Crude rose .71%, ending at $65.39, its highest price since March.