Markets Green on +0.6% CPI, Jobless Claims

Thursday, June 10, 2021

Two key economic reads this morning ahead of the bell, in a week that has gone quiet on broader metrics and Q1 earnings activity, have both come out better than expected. Both Initial and Continuing Jobless Claims, along with Consumer Price Inflation (CPI) for May, outperformed analysts’ expectations, and pre-market futures are gaining as a result: the Dow is +150 points, the S&P 500 +10, and the Nasdaq +20 points at this hour.

Because inflation fears have been on the radar of most investors over the past month or so — basically when the 10-year Treasury yield jetted up to 1.7% — we take a close look at the CPI report for May out this morning. The headline +0.6% and core (subtracting volatile food & energy prices) is +0.7%, which both topped the +0.5% expected. They are also both down a tad from the previous month’s unrevised +0.8% and +0.9%, respectively.

Led by 7% growth in things like airline tickets and used cars, CPI is clearly feeling the effects of inflation. It may be a bit early to tell whether this is yet transitory inflation growth, as the Fed has supposed until now, or whether higher prices are stickier than that. Year over year, we’re +5.0% on headline CPI — not seen since August 2008 — and +3.8% year over year on core — the highest monthly print since, get this: January 1992.

Initial Jobless Claims reached 376K last week, higher than the 370K expected, but still a new pandemic low, -9000 claims from the previous week’s 385K. Continuing Claims, from a week in arrears, also found a new low during this era of Covid, at 3.499 million — a sold improvement from the previous week’s slightly downwardly revised 3.77 million. The previous pandemic low on Continuing Claims was 3.60 million, back in the second week of May.

We continue the parade of metrics verifying the Great Reopening after the opening bell, with Business Formation for May (year over year), Q1 Household Wealth and a new look at the Federal Budget this afternoon. Even though this morning’s jobless claims data says 15.3 million Americans continue to receive some sort of unemployment support, our economy is clearly headed in the right direction — and the markets are buying in.

Questions or comments about this article and/or its author? Click here>>

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?

Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

AccessZacks Top 10 Stocks for 2021 today >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
Invesco QQQ (QQQ): ETF Research Reports
 
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report