This Week
It was (another) week dominated by geopolitics.
Higher oil prices showed up (again) in some economic data this week…
- Higher energy prices pushed headline CPI inflation to a three-year high of 3.8% year over year in April. Just two months earlier, pre-conflict, it was 2.4%. April was also boosted a bit by housing inflation getting double-counted to make up for October’s missed reading due to the government shutdown.
- Despite inflation, the economy looks resilient. In April, headline and “core” retail sales both rose 0.5% month over month (m/m) and manufacturing production rose 0.6% m/m, indicating demand is holding up.
This (plus last week’s strong jobs report) all point to the Federal Reserve focusing more on inflation than the labor market in the near term… right as we have a change in leadership, with the Senate confirming Kevin Warsh as the new Fed Chair (today is Chair Powell’s last day as Chair).
Bonds appear to be focusing more on inflation, too, as 10-year Treasury yields rose over 20 basis points this week to 4.6% – its high in over a year (and 30-year yields are around their high since 2007) – which seemed to weigh on stocks a bit, leaving the Nasdaq-100® flat for the week.
Next Week
Here are the top events I’m watching next week:
- Wednesday: NVDA Earnings (Q1), Fed Minutes (Apr.)
- Thursday: WMT Earnings (Q1), S&P Manufacturing and Services PMIs (May Prelim.)
