THE WEEK ON WALL STREET
Stocks ended the week mixed as investors appeared to shrug off a hotter-than-expected inflation report. The Dow Jones Industrial Average slipped 0.80%, while the Standard & Poor’s 500 advanced 0.41%. The Nasdaq Composite index led, tacking on 1.85%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.31%.
ANOTHER QUIET WEEK
The market traded in a narrow range for much of last week as investors anxiously awaited the release of the Consumer Price Index (CPI) on Thursday. May’s CPI saw an increase in inflation that exceeded most expectations. Paradoxically, markets advanced on the news, sending the S&P 500 to a new record close and the technology-heavy NASDAQ Composite higher. Perhaps equally unexpected was the decline in the 10-year Treasury yield, which slipped to 1.45%, touching its lowest level in three months. On Friday, stocks were unable to materially build on the previous day’s advance, though the S&P 500 managed to add onto its record Thursday close.
Consumer prices headed higher in May, rising 0.6% from April and by 5.0% from a year ago. It was the largest jump in the CPI since August 2008. Core inflation, which excludes food and energy prices, rose 3.8% — the sharpest increase in nearly three decades. Automobile prices were one of the primary contributors to May’s number. Used car and truck prices jumped 7.3% month-over-month and by 29.7% from a year ago. New cars experienced their highest monthly increase since October 2009 as a result of an inventory shortage stemming from tightness in the semiconductor supply.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Retail Sales. Industrial Production.
Wednesday: FOMC (Federal Open Market Committee) Announcement.
Thursday: Index of Leading Economic Indicators. Jobless Claims.
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Tuesday: Oracle Corporation (ORCL)
Thursday: The Kroger Co. (KR)
If you think things are getting expensive, you’re right. The “transitory” overheated inflation the Fed has forecasted is here. They say transitory because they believe it will calm down soon without them having to raise rates in the near terms. The jury is still out on that one. The big news of the week will come on Wednesday when the Fed has their meeting on interest rates. They will not raise rates, but the big question everyone is asking is will they address when they expect to raise rates. So, stay tuned.
Meanwhile, some anecdotal evidence of a potentially overheating economy. Recently, Italian artist Salvatore Garau recently auctioned an invisible sculpture for 15,000 euros ($18,300). The sculpture's initial price was set between 6,000 and 9,000 euros; however, the price was raised after several bids were placed. Titled 'Io Sono' (Italian for "I am"), the 67-year-old artist's sculpture is "immaterial," meaning that the sculpture does not actually exist. Per Garau's instructions, the sculpture must be displayed in a private home free from any obstruction, in an area that is about 5 ft. long by 5 ft. wide. Because the piece does not exist, there are no special lighting or climate requirements. That’s right folks, he sold nothing but thin air for $18,300.
Have a good week!