CPI Takes A Bite Out Of Futures

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CPI Takes A Bite Out Of Futures
mohamed_hassan / Pixabay

In his Daily Market Notes report to investors, while commenting on CPI, Louis Navellier wrote:

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CPI Disappoints

CPI takes a bite out of futures.

The Consumer Price Index for April was announced this morning and was higher than the forecast. Stock futures were well in the green in the hopes for evidence that inflation had peaked.

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While the forecasts were too low (8.1% year over year was the consensus), the number 8.3% was a lower increase than the forecasted 8.5% y-o-y in March.  The Core number (excluding food and energy) was up 6.2% y-o-y, above the expectation of 6.0%.

After initially dropping hard into the red, the stock indexes then turned around into the green, reflecting that demand for stocks remains high at current much lower levels than we began the year.

Inflation And Geopolitics Concerns

Half of the S&P is currently trading below the March lows. In the Charles Schwab trader sentiment survey this morning, 53% said they were bearish and 43% said it was a good time to buy. Top concerns were inflation (20%) and geopolitics (15%).  Despite the higher than expected inflation numbers, longer interest rates have not spiked.

The 10-year is up 3bps to 3.02%, well below the 3.20% recent high. On the short end, however, the 2-year is up 8bps to 2.70% as the likelihood for a more aggressive Fed tightening has increased.

Inside the inflation report, we find inflation-adjusted wages declined 0.1% on the month despite a 0.3% increase in nominal wages. Over the past year, real earnings have dropped 2.6% despite wages being up 5.5%.

Collect on Pullbacks

Stocks with solid earnings and strong balance sheets remain sturdy, while the more speculative names valued on future earnings potential continue to swoon, perhaps best reflected with BitCoin dropping below $30K, a low for the last 12 months.

Continue to collect strong names on pullbacks and lighten up on weaker earners on rallies.

Coffee Beans

According to Gallup’s annual Economy and Personal Finance poll, only 30 percent of U.S. adults think that now is a good time to buy a house – down more than 20 percentage points from 53 percent in 2021 - by far the lowest level of confidence since the question was first asked in 1978. In fact, the share of people thinking it was a good time to buy a house had never dropped below 50 percent before – not even during or in the aftermath of the 2008 housing crisis. Source: Statista. See the full story here.

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One of Wall Street's renowned growth investors, Louis Navellier is the editor of four investing newsletters: Blue Chip Growth, Emerging Growth (formerly known as MPT Review), Quantum Growth and Global Growth. His longest-running publication, Emerging Growth has a track record of beating the market nearly 3-to-1. Navellier is the author of a BusinessWeek best seller, "The Little Book That Makes You Rich", and the Chairman and Founder of Navellier & Associates, Inc.
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