New Highs in Stocks and Inflation | Daily Market Update

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Friday, June 11, 2021

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New highs in stocks and inflation

The S&P 500 Index soared to its 27th new high of 2021, while inflation also jumped to multiple year highs.

  • The Consumer Price Index (CPI) for May jumped 5.0% year-over-year, the most since June 2008.
  • Stripping out volatile food and energy, the core CPI added 3.8% year-over-year, the most since June 1992.
  • In the face of this, the S&P 500 made a new high, causing many to wonder—how was that possible?
  • Our take is this is still a reopening play. Massive jumps in the price of used cars (7.3% after a record 10% the prior month), airfare (7.0%), and auto rentals (12.1%) accounted for much of the jump.
  • If you look at other parts of the report, it was much more in line with historical averages. At this time, we continue to think inflation is transitory and will come back down later this year.

Daily Insights

U.S. equities open modestly higher amid proposed fully funded bipartisan infrastructure agreement

See enlarged chart.

Checking the pulse of small business

  • The aggregate economic foundation of small business in this country probably has a ways to go before it fully recovers.
  • Most high-frequency economic data indeed looks good, but we should remain mindful of still unstable areas of the economy that may not show up in many data sets.
  • We remain hopeful that small business may soon recover enough to add a final boost to domestic conditions.
  • To check the pulse of small business, we take a look at survey data from the National Federation of Independent Business (NFIB) in today’s LPL Research blog, available at 12p.m. ET.

Technical update

The S&P 500 finally made and closed at record highs, following nearly three weeks of trading just inches below the previous May 7 high. However, leadership leaned defensive and breadth was poor as the 10-year yield traded to its lowest level since March 3. On the New York Stock Exchange (NYSE), more stocks declined on the day than advanced.

Policy Shifts May Challenge Markets

LPL Research contends that policy tailwinds may turn into headwinds in 2022, but economic fundamentals are likely to dominate. Learn more in this week’s Weekly Market Commentary.

Meme Stock Mania

On this week’s LPL Market Signals Podcast, Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder examine what meme mania means for investors, explore how policy could impact things for the rest of 2021, and dissect the recent weaker than expected monthly jobs data.

 

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