Marketbites: Tame Inflation Report
Portfolio Manager Commentary:
The Nasdaq Composite closed higher Wednesday as investors fled to tech stocks after a tamer-than-expected inflation report. April consumer prices climbed 4.9% from a year ago, which was less than the 5% gain anticipated by economists polled by Dow Jones. Month-over-month inflation matched expectations with a 0.4% increase in April. Treasury yields tumbled following the report, further supporting a stock market which has been worried about higher rates snuffing out economic growth. The yield on the 2-year Treasury fell about 11 basis points to 3.91%, while the rate on the 10-year declined 8 basis points to 3.44%.
Overall market gains were contained as cyclical stocks, which are most closely linked to the economy, traded lower. Shares like Nike and Caterpillar ended the session lower as some investors reasoned that inflation was slowing because a recession is imminent or has already arrived. Airbnb and Twilio fell 10.9% and 12.6%, respectively, a day after reporting weak forecasts. Electric vehicle maker Rivian closed 1.8% higher, a day after the company posted a narrower-than-expected loss. But despite the latest sign of inflation increasing at a lower monthly clip in April, Wall Street is seemingly cautious on sparking a full-blown rally.
Chart of the Day:
The American home buyer's quandary: Nobody's selling. Many Americans who want to move are trapped in their homes, locked in by low interest rates they can’t afford to give up. These “golden handcuffs” are keeping the supply of homes for sale unusually low and making the market more competitive and pricey than some forecasters expected. Even some people who can accept higher mortgage rates are staying put because they are struggling to find something to buy. The reluctance of homeowners to sell differentiates the current housing market from past downturns and could keep home prices from falling significantly on a national basis, economists say. This could dull the Federal Reserve’s efforts to slow inflation by cooling the economy.
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