On Wednesday, Wall Street received the latest consumer price index reading, which was slightly worse than expected for April, with core CPI coming in line with projections.
If we analyze the figures, the general CPI for April increased 0.3% compared to March, which represented a mark below the consensus projection of +0.4%. Meanwhile, the core CPI, which excludes food and energy prices, rose 0.3% month-on-month, in line with forecasts.
Markets reacted positively to inflation data during trading on Wednesday. Here's what Searching Alpha analysts have to say about the latest CPI release:
- Mott Capital Management Inflationary trends are entrenched, increasing the likelihood of stagflation: “The economy may be experiencing a period of stagnation or stagflation, with unclear implications for the future…Currently, the CPI and core CPI do not show trends consistent with a 2% inflation rate, and today's data did little or nothing to change that.”
- Jeremy La Kosh in April Inflation: Signs of optimism, May-August reports will dictate Fed policy: “While investors cheered the news with stocks rising and interest rates falling, the report highlighted some persistent areas where inflation is still present and the importance of the next few months of data.”
- Ronald Surz In This current wave of inflation is not transitory, the first wave was: “The facts are (1) the current wave of inflation will last a long time, and (2) the first wave would have ended without the help of the Federal Reserve because it was transitory “
- Lorenzo Fuller In the first quarter, inflation was a jump towards new historical highs: “Yesterday's report reaffirms the disinflationary trend, which is why we are at new historical highs for the main market averages.”
- Cullen Roche on 3 things: CPI, the 'Casino' of the stock market and stagflation: “Wednesday's CPI report was a big relief for the Federal Reserve after 4 consecutive bullish surprises… The problem is that inflation is now almost exactly in line with the historical trend and unemployment is well below trend.”
The theme of inflation and Federal Reserve policy will keep the focus on US Treasury (US2Y) (US10Y) yields, as well as exchange-traded funds linked to Treasuries and fixed income. Below are some funds that investors can monitor: (NASDAQ:BND), (NYSERCA:AGG), (BNDX), (MUB), (VCIT), (LQD), (MBB), (TLT), (TLH), (IEF), (IEI) and (SHY).
Also, see here how yields are trading along the entire yield curve.
