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Economic Data Deluge

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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.