Read the highlights of this week’s commentary from Helios:
Inflation reports aren’t done with us yet. May’s Consumer Price Index, which showed signs of slight cooling in April, turned back around to accelerate in May with an 8.6% year-over-year increase and a 1.0% month-over-month increase. Energy came back with a 3.9% rise, following April’s 2.7% decline, and food prices accelerated to 1.2% from 0.9% in April. Core inflation, which excludes food and energy, increased 6.0% year-over-year and 0.6% month-over-month.
The initial market reaction in equity markets had the S&P 500 falling 2.5% in early Friday trading, and yields on 10-year US government bonds increased past 3.10% before lunchtime.
The probabilities of more 50 basis point hikes rose substantially. As of Friday, the market is now expecting 50 basis point hikes in each of the next four Fed meetings.
April’s rebound in the University of Michigan’s Consumer Sentiment Index appears to have been a head fake, with May’s release reversing April’s gains, and then the preliminary June release shows another hit to how consumers feel about the economy as consumers are the most pessimistic since the survey began in the early 1990s.
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