Stocks End Mixed After A Mixed CPI Report  Image: Bigstock Stocks ended mixed yesterday with the Dow and the S&P finishing lower, while the Nasdaq finished higher. After yesterday's Consumer Price Index (CPI) inflation report came out, nobody was quite sure how to react. Interestingly, all of the indexes were higher in the morning, but by day's end, only one remained in the green. The CPI report confirmed inflation was still moderating. But that moderation slowed, and came in a little hotter than expected. For the month, headline inflation was up 0.5% vs. the consensus for 0.4%. On a y/y basis, it was up 6.4% vs. views for 6.2%. The core rate (ex-food & energy) was up 0.4% m/m vs. the consensus for 0.3%, and the y/y rate was up 5.6% vs. views for 5.5%. The good news is that both the headline rate and the core rate were down vs. last month's y/y prints of 6.5% and 5.7% respectively. But the previously reported m/m changes were revised up from -0.1% to 0.1% for the headline, and from 0.3% to 0.4% for the core. On the one hand, you could be disappointed that the numbers missed expectations. But on the other hand, the inflation readings did decline for yet another month. And let's remember where we came from – back in July of last year, the headline inflation rate was up 9.1% y/y, while the core rate's summer high was 6.5% y/y. So why the mixed market results?
For one, because the Fed's target inflation rate is 2%. And at this pace, it appears it's going to take a long, long time to get there. Jerome Powell said as much at the last FOMC meeting and press conference. And that could very well mean the Fed will indeed have to hit their projected terminal rate of 5.1% after all, or even if they stop short of that, they may end up having to keep it at those elevated levels for longer.
Second, while the CPI was a bit of a mixed bag yesterday, we've got the Producer Price Index (PPI) inflation report tomorrow. Will that be the same story? Better? Or worse? Nobody knows for sure, hence the mixed results. In the meantime, it's nice to see inflation moderating. But there's still plenty of work ahead. In other news, yesterday's NFIB Small Business Optimism Index came in at 90.3 as expected, which was up from last month's 89.8. Today we'll get MBA Mortgage Applications, the Housing Market Index, Retail Sales, the Empire State Manufacturing Index, Industrial Production, Business Inventories, and the Atlanta Fed Business Inflation Expectations. And of course, more earnings with another 227 companies on deck to report today. Between all of the economic reports and earnings reports today, and position squaring after yesterday's CPI, and tomorrow's PPI, it could be a busy day. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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