Weekly Economic Update: Consumer Prices Spike While Stocks Take a Step in the Other Direction
Presented by Nicholas Wealth Management
May 17th , 2021
Weekly Market Update
In this week’s recap: As consumer prices take a big step up, stocks take a step in the other direction.
The Week on Wall Street
A surge in consumer inflation unsettled investors, leading to a turbulent week of trading on Wall Street.
The Dow Jones Industrial Average slipped 1.14%, while the Standard & Poor’s 500 fell 1.39%. The Nasdaq Composite index dropped 2.34% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 3.02%.1,2,3
Inflation Concerns
The market has been troubled recently by building inflationary pressures. Investors are concerned that rising prices may hurt corporate profits and force the Fed to tighten its monetary policy sooner than anticipated. Worse, investors fear the Fed may have to react more aggressively if it waits too long to act.
After back-to-back losses, the retreat in stock prices culminated on Wednesday, following the release of the higher-than-anticipated Consumer Price Index (CPI) report.
Stocks managed to claw back some of the week’s losses with a Thursday-Friday rebound, sparked by investors doing some bargain hunting.
Consumer Prices Spike
Wednesday’s release of April’s CPI inflamed investors’ inflation fears, as consumer prices rose 0.8% in April and jumped by 4.2% year-over-year. These numbers were above expectations.4
April price increases were led by a remarkable 10% increase in used cars, with additional pockets of sharp increases, notably in transportation services and commodities. Perhaps equally concerning is that energy costs showed a decline during April, a price weakness that may reverse in the coming months.5
Tip of the Week
If you are going to buy new appliances, computers, or TVs this year, you may not want to buy on price. Buying on reliability (after doing some research per brand) may end up saving you money in the long run.
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CITATIONS:
1. The Wall Street Journal, May 14, 2021
2. The Wall Street Journal, May 14, 2021
3. The Wall Street Journal, May 14, 2021
4. CNBC, May 12, 2021
5. U.S. Bureau of Labor Statistics, May 12, 2021
6. U.S. Bureau of Labor Statistics, May 12, 2021
