Stocks Gain After Choppy Week of Inflation Data and Middle East Treaty Hopes; Bonds Mixed
Good morning,
The Dow (+0.7%), NASDAQ (+0.7%), S&P 500 (+0.7%), and EAFE (+1.0%) all finished the week higher. Meanwhile, bonds were mixed as taxable bonds gained 0.5%, but tax-free municipal bonds fell 0.1%. The 10-year Treasury fell 0.06% to finish the week at 4.48%.
Amid a choppy trading week, markets finished strong, as rumors of a deal with Iran re-surfaced on Friday, pushing the markets up sharply for the day and back into positive territory for the week. Key inflation data (Consumer Price Index [CPI] and Producer Price Index [PPI]) were reported on Wednesday and Thursday, and showed a sharp rise inflation in May. The overall CPI rose 4.2%, the highest since 2023. Core inflation (excluding gas and food) rose 2.9%, which wasn’t quite as bad. See the chart below. PPI rose 1.1% over the prior month, exceeding economists’ expectations of 0.7%, but core PPI was up 0.4%, less than expectations. In short, these data are demonstrating that the rise in gas and energy prices has had a significant impact on inflation since the conflict with Iran and the restricted transport of oil from the Middle East.
On Friday, reports from Washington emerged that a deal with Iran was imminent, and stocks rose sharply. While not reflected in last week’s data, a deal with Iran was reportedly reached on Sunday (yesterday), which is scheduled to be signed on Friday, June 19. Stocks are set to jump again today, as oil prices have turned about 5% lower, as the price of oil is now hovering around $80 per barrel. That compares to the prices exceeding $100 per barrel during April and May. From my personal perspective, I am delighted, but feel a little like the boy who cried wolf, in that I will believe it when I see it. If this treaty holds true, and oil begins to flow freely through the Strait of Hormuz, then inflation should start to fall, as well as prices at the pump and the cost of transporting goods. Additional hopes will be that investors can begin focusing on the economy, rather than the geopolitical events in the Middle East. I hope I’m not asking too much.
Have a great day and week, and Happy Father’s Day to all those with whom it applies.
Source: Yahoo Finance
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The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
