CXSE - Weekly Market Pulse: Ch-Ch-Changes
2024-05-20 10:50:00 ET
Summary
- Whatever traders and investors were focused on last week, the result was a drop in interest rates across the curve, with the 10-year Treasury yield dropping by about 8 basis points.
- Over the last month, with the 10-year yield down a little over 16 basis points, interest rate-sensitive assets like REITs and small-cap stocks have led the way.
- Utilities continue to lead the way on the back of rising expectations for AI electricity usage.
There were two important inflation reports last week. One of them, the Producer Price Index, focuses on wholesale prices, and it showed inflation hotter than expected in April. The year-over-year change bottomed in June of last year at just 0.3% and has been rising steadily since then. It now stands at 2.2%. The market reaction to this report was – apparently – positive in that bond yields fell and stock prices rose. Why would a hotter-than-expected inflation report produce a positive reaction in the market? Changes in producer prices – especially when prices fall – do not always flow through to the consumer level and that’s what the economics profession has deemed important. And so the market movements on the day the report was released probably had little to do with the PPI....
Weekly Market Pulse: Ch-Ch-Changes