Updated: May 29, 2022
Owing to the exacerbated concerns about recession, the stock market has recorded a drop for 6 weeks in a row. S&P and Nasdaq were down 2.4% and 2.8% respectively despite the rebound on Friday. CPI dropped slightly to 8.3% from 8.5%, which is still higher than market expectation. Bear in mind that the inflation target of the Fed is 2%. Although the market thinks the inflation has peaked, there is still a long way to go for the Fed to accomplish its goal.
*Data as of market close. 5-day change ending on Friday.
VIEWS FROM THE STREET
HSBC: The recent CPI result has implied that there is significant upward pressure on inflation for both goods and services over the course of 2021 due to the combination of strong demand against constrained supply highlighted by the inventory challenges and tight labor markets.
J.P. Morgan: With the completion of the Q1 earnings season, the result varies at a sector level. Energy, Materials, and Industrials have grown strong, while Financials has produced poor earnings results in both the US and Europe. Disappointment can also be found in the Discretionary in the US and Tech in Europe.
Deutsche Bank: "Recent drawdown in stock prices looks like an exaggerated version of the end of the cycle in late 2018."
Deutsche Bank: We have to look at real rates as the recent stock market performance reflects the delayed reaction to the real rates changes. Stocks will be dragged even lower if the real rates continue to go up further.