THE WEEK ON WALL STREET

Stocks posted losses in a holiday-shortened trading week as the first-quarter earnings season kicked off and investors digested new inflation data. 

The Dow Jones Industrial Average declined 0.78%, while the Standard & Poor’s 500 fell 2.13%. The Nasdaq Composite index dropped 2.63% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.20%.^1,2,3

WATCHING BONDS         

Stocks began the week moving lower as bond yields climbed higher, with growth stocks suffering some of the steepest declines. Investors considered China’s ongoing lockdown warily, worried it might worsen supply-chain issues.

Historically high consumer and producer price inflation reports were shrugged off by the stock and bond markets in the main, with bond yields slipping despite the hot inflation numbers. Despite an encouraging start to the first-quarter earnings season, stocks pulled back on Friday as bond yields resumed their move higher ahead of a three-day holiday weekend.

AN EYE ON INFLATION             

On Tuesday, March’s Consumer Price Index (CPI) report offered little indication that inflation may be moderating, as prices increased 8.5% year-over-year, the fastest pace in 40 years. Core inflation, excluding food and energy prices, recorded a 6.5% jump, the steepest rise since August 1982. One encouraging note was that core inflation showed potential signs of ebbing, posting a monthly increase of 0.3% versus expectations of a 0.5% increase.⁴

The following day, March’s Producer Price Index, a potential insight into future inflation, rose 11.2% year-over-year. A March survey by the National Federation of Independent Business released earlier in the week, indicated that half of the respondents were likely to raise prices in the next three months.⁵