Economic Outlook Dampened by Consumer Sentiment Drop and Inflation Increase
The University of Michigan's consumer sentiment index dropped nearly 6 points from April to May, falling to a six-month low of 57.7 and indicating that the debt ceiling fight had a negative impact on the economic outlook held by many Americans.[0] The data came out on Friday morning, and it showed that the preliminary read for the index in May was down from the 63.5 that prevailed in April's final numbers.[1] This drop in consumer sentiment was one of the many market themes that emerged last week.
As anticipated, the Bureau of Labor Statistics announced on Wednesday that the consumer price index had risen by 0.4% from March to April. The data showed headline inflation rose 4.9% over last year, while “core” prices, which strip out the more volatile costs of food and energy, rose 5.5%.[2] The Labor Department's consumer price index for April rose 0.4% on the month, matching targets, with an annual increase of 4.9%, which was slightly cooler than the 5% estimate. The core prices followed the predicted trend by increasing 0.4% for the month, resulting in an annual gain of 5.5%.[2]
The yield on the 10-year U.S. Treasury dropped to 3.45% after the CPI inflation report, while the 10-year yield fell 6 basis points to 3.38% and the two-year yield was down 4 basis points to 3.88%.[3] The iShares 20+ Year Treasury Bond ETF TLT was 0.8% higher on the day.[4] Additionally, the weekly jobless claims report showed 264,000 in the week ended May 6, compared to 242,000 previously and 245,000 expected, rising to the highest since October 2021.[5]
Tesla (TSLA) raised prices on its Model X and Model S cars in the U.S., the third price increase in less than a month, causing Tesla shares to rise more than 2% in pre-market trading.[6] Elon Musk announced on Friday that he has hired a Twitter CEO, which turned out to be Linda Yaccarino, NBCUniversal's advertising chief.[1] Despite some Wall Street analysts' predictions that Musk stepping back from his duties at Twitter would be positive for shares of the electric carmaker, shares of Tesla fell about 1.7% in early afternoon trade on Friday.[1]
In the commodities market, Brent crude fell 0.4% to $74.70 a barrel, and WTI crude dropped 0.3% to $70.65 a barrel.[7] The United States Oil Fund ETF USO was 1.75% lower to $63.27 per share.[4]
In the stock market, the Dow Jones Industrial Average traded flat at 33,300.6, the S&P 500 lost 6.6 points or 0.[8]
0. “Stock Market Today: Dow, S&P 500 Head for Weekly Losses; PacWest Stock Falls” The Wall Street Journal, 12 May. 2023, https://www.wsj.com/livecoverage/stock-market-today-dow-jones-05-12-2023
1. “Futures higher ahead of Friday trading: Stock market news today” Yahoo Finance, 12 May. 2023, https://finance.yahoo.com/news/futures-higher-ahead-of-friday-trading-stock-market-news-today-115201974.html
2. “Dow Jones Rallies On CPI Inflation Data; Airbnb Plunges 14% On Earnings” Investor's Business Daily, 10 May. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-fall-ahead-of-cpi-inflation-data-airbnb-plunges-on-earnings/
3. “Tech, Bond ETFs Rally After CPI Report” etf.com, 10 May. 2023, https://www.etf.com/sections/features/tech-bond-etfs-rally-after-cpi-report
4. “US Stocks Dip, Big Tech Holds On Soft PPI, Declining Treasury Yields: Traders Are ‘All-In' On June Fed Pause …” Benzinga, 11 May. 2023, https://www.benzinga.com/markets/futures/23/05/32336393/nasdaq-s-amp-p-500-futures-climb-on-rate-optimism-bond-yield-retreat-analyst-disregards-debt-ceil
5. “Stock market news today: Jobless claims spike reignites recession fears” Markets Insider, 11 May. 2023, https://markets.businessinsider.com/news/stocks/stock-market-news-today-jobless-claims-spike-reignites-recession-fears-2023-5
6. “Stocks Turn Lower as Long-Term Inflation Expectations Unexpectedly Climb” Barchart, 12 May. 2023, https://www.barchart.com/story/news/16845209/stocks-turn-lower-as-long-term-inflation-expectations-unexpectedly-climb
7. “US Futures, European Stocks Rise” Morningstar, 12 May. 2023, https://www.morningstar.com/news/dow-jones/202305125303/us-futures-european-stocks-rise
8. “Dow futures trade lower, data heavy week ahead By Investing.com” Investing.com, 15 May. 2023, https://www.investing.com/news/stock-market-news/dow-futures-trade-lower-data-heavy-week-ahead-3081906
