Markets were mixed for the week with growth pockets of the market leading the way, despite a higher-than-expected inflation reading for the month of May. The Consumer Price Index increased by 0.6% month-over-month and by 5% from a year ago. Traders sold the inflation news with cyclicals and value stocks falling for the week as some investors chalked up the higher reading to base effects and transitory supply chain issues. How officials define “transitory” in respect to inflation and clues to when the Fed could start to taper will be watched. Risk assets have been in a goldilocks scenario with easy monetary policy and well-above trend economic growth that is likely to continue into 2022.
Treasury yields fell last week on the longer end of the yield curve, while economic data released last week pointed to a continued recovery in the labor market. Initial jobless claims reached a pandemic low of 376,000, while nearly 1 million new job openings in April pushed job openings to a record 9.3 million as employers continue to face hiring challenges. Despite quickly increasing consumer prices, the 10-year Treasury yield fell last week by the most since June of last year, partly based on the Fed’s view that rising inflation is temporary and that it doesn’t plan to move off its accommodative stance in the near term.