Market commentary

Initial jobless claims fell from 478,000 to 434,000 for the week ending May 7, an improvement, however, claims remain stubbornly above the 400,000 mark.

Producer prices rose more than expected coming in up 6.8% year over year. However, excluding food and energy the producer prices for April only rose 2.1%. This shows us that the rise in food and energy prices have been larger than expected by economists and are having a bigger impact on the price reports.

The impact of higher food and energy prices on the consumer was evident is today’s retail sales report. The headline retail sales figure came in at 0.5% versus expectations of 0.6%. However, when stripping out the contribution of autos and gas, retail sales only rose 0.2% in April.
The bottom line of the reports we are seeing now is that the increased oil prices, along with food prices to a smaller degree, are creating more headline inflation than anticipated and cutting into consumption more than expected.

U.S. stock indices are lower after the stronger than expected inflation data and bond prices are flat, which is an interesting phenomenon. Normally, one would expect bonds to react negatively to reports of higher inflation.