Stocks Gain on Easing Inflation Data; Bonds Mixed

The Dow (+1.2%), NASDAQ (+0.3%), and S&P 500 (+0.8%) exhibited gains for the week.  Conversely, taxable bonds fell about 0.5% as the 10-year Treasury yield rose from 3.29% to 3.52%.  Bucking the tend were tax-free municipal bonds, as they gained about 0.1%, extending their recent rally that started on March 1.

Mixed economic data were reported last week.  The widely known inflation measure, Consumer Price Index (CPI), eased to 5.0%, but the core inflation rate still persisted, as it increased 0.4% over the prior month.  However, another inflation measure - the Producer Price Index (PPI) – increased on 2.7& from last year, and fell 0.5% over the prior month.  Lastly, retail sales fell for the 2nd straight month, declining by 1% over the prior month, and that doesn’t include inflation, making those numbers fall even more.  These are all important data that the Fed will use to decide if it will raise interest rates by another 0.25% at its next meeting in early May.  Investors appear to be betting that the Fed will pause its rate hiking campaign at or following its next meeting.

Last week also started earnings season with the big banks reporting late in the week.  Earnings reports were led by JP Morgan, Citigroup, and Wells Fargo, as they each reported quarterly earnings that easily topped expectations, and investors’ reduced concerns with a banking crisis.  More banks will be reporting this week, as well as many other sectors of the economy.  Other than the kickoff of earnings season, there are no significant economic data being reported this week.

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