Markets ended a volatile week lower as investors fear inflation could hurt corporate profit margins and cause the Federal Reserve to end its easy-money policies. Consumer prices jumped by 4.2% year-over-year and 0.8% for the month of April, well above consensus estimates. Major contributors to the rise in prices were used cars, rental cars, airfare, lodging, and food away from home. In addition, producer prices rose more than economists forecasted. In other economic news, retail sales stalled in April after a sharp advance in March due partially to stimulus checks. Fears of higher inflation and interest rates led to a large selloff in many growth stocks.
Longer-term Treasury yields climbed last week as inflation data came in higher than expected. The Producer Price Index also topped expectations as supply bottlenecks and materials shortages contributed to an increase in production costs. Higher inflation has weighed on consumer sentiment, according to the University of Michigan Consumer Sentiment Index, which came in well below even the lowest estimates with consumers worried about higher prices for things like homes, cars, and household durables. Initial jobless claims reached a new pandemic low of 473,000, making significant progress from the high of over 6 million, while job openings in the U.S. reached a record of over 8 million in March as the economy reopens but businesses face challenges filling open positions.