This week brought two big inflation reports, and both told the same story. Prices at the gas pump remain problematic. Consumer prices (CPI) rose 4.2% over the past year, the highest reading in three years, with energy costs jumping nearly 4% in May alone. The ongoing conflict with Iran continues to keep oil prices at an elevated level. Over the past twelve months, energy prices have risen more than 23%. This issue alone is frustrating and impacting all of us. But there is some encouraging news. Setting aside the food and energy components, prices rose just 0.2% for the month (below the 0.3% economists expected and down from April’s 0.4% pace) and 2.9% for the year. Both the month and yearly figures were better than economists had been expecting in the broader categories. In other words, outside of fuel and food costs, prices are still somewhat behaving. This doesn’t mean we aren’t feeling those pressures on our wallets, but it does indicate that there is some flattening occurring.
Wholesale prices, what businesses pay before goods ever reach the shelves, told a similar tale. They jumped 1.1% in May, well above forecasts, putting the twelve-month increase at 6.5%, the highest since late 2022. Nearly 80% of the jump came from goods prices, driven by the surge in energy that included a 23% spike in wholesale gasoline. Once again, though, the picture outside of energy was calmer, with wholesale prices excluding food and energy actually coming in below expectations. Because businesses often pass these costs along to customers, wholesale prices can hint at where consumer prices are headed, which makes the energy-driven nature of this report worth watching.
With all of those economic reports going on, the stock markets had a wild ride over the week. Stocks fell sharply midweek on the inflation news and rising tensions, then rallied Thursday afternoon after positive news was announced that a potential settlement had been reached with Iran. Oil prices posted their biggest one-day drop since the conflict began, and the Dow recovered more than 900 points in a single day. Details of the agreement are still emerging, but if it holds, the biggest force behind this spring’s inflation may finally be easing. Capping off the week, SpaceX began trading as a public company today after pricing the largest IPO in history. A $75 billion offering that drew more than $250 billion in investor demand. The stock was priced at $135/share and opened at $150, creating the worlds first Trillionaire in Elon Musk.
Looking Ahead
The Federal Reserve meets next Tuesday and Wednesday, June 16–17, and this week’s data will be front and center. With gas prices potentially easing amid a resolution with Iran, some economists believe May might prove to be the peak for inflation this year.
Interesting to Note
Here is a fun one. Scientists studying Ötzi the Iceman, the 5,300-year-old mummy discovered frozen in the Alps back in 1991, found living yeast strains still present in and on his remarkably preserved body. Researchers cultivated the ancient yeast, coaxed it into a sourdough starter, and baked a loaf of bread with it. By their own account, the result was “very, very good.” Next on their list: trying to brew beer from the same prehistoric microbes.
As always, reach out with any questions.
Have a wonderful weekend!
Written by: Chris Wasson CFP®
Sources:
CNBC – Consumer Prices CNBC – Wholesale Prices
NAR Home Sales TheStreet – Markets
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Mosaic Asset Partners, LLC is not affiliated with Kestra IS or Kestra AS. Investor Disclosures: https://www.kestrafinancial.com/disclosures
