Is inflation on its way out?
The latest producer price index suggests so. Last month's prices were 0.5% lower — emphasis on lower, not a slower rate of increase — than February's. Stripping out food and energy, the PPI fell 0.1%, bucking an expected 0.2% increase.
Since the PPI measures how much companies pay to produce consumer goods and other commodities, and since it takes time for price changes to filter down from the producer to the consumer, many think the PPI acts as a forecast for consumer prices.
And March's consumer price index report, released Wednesday, already showed that price increases are slowing for consumers. The PPI, then, doesn't just signal hope — it confirms that investors' hope wasn't misplaced. The latter sentiment is much more powerful.
Little wonder markets rallied Thursday. The S&P 500 was a big winner: It added 1.33% to end the day at its highest level since February. The Dow Jones Industrial Average rose 1.14%, and the Nasdaq Composite climbed 1.99%, snapping a three-day losing streak.
The Nasdaq was boosted by a surge in tech stocks, which rose on hopes that the Federal Reserve may soon pause increases in interest rates. Amazon shares popped 4.67% — buoyed, also, by the company's AI announcement. Other big tech rallied too: Alphabet climbed 2.67%, Apple jumped 3.41% and Meta rose 2.97%.
Friday in the U.S. will be another big day for markets: JPMorgan, Wells Fargo and Citi report earnings before the bell. If the banks' numbers look good (and they should, I suspect, considering how many depositors fled to bigger banks after SVB's collapse) — and, more crucially, if the banks think the months ahead won't be too painful for the bottom line — expect to see another positive day for markets.
But if they echo the Fed's expectations of an impending recession, it's likely Thursday's optimism will remain a one-day sentiment.
