Stocks Retreat As Inflation Exceeds Expectations

U.S. has just released Inflation Rate and Core Inflation Rate reports for June. Inflation Rate grew by 0.9% month-over-month in June compared to analyst consensus which called for growth of just 0.5%. On a year-over-year basis, Inflation Rate increased by 5.4% compared to analyst consensus of 4.9%.

Core Inflation also exceeded analyst expectations, increasing by 4.5% year-over-year compared to analyst estimate of 4%.

Not surprisingly, S&P 500 futures found themselves under pressure after the release of inflation reports. Analysts expected that Inflation Rate would decline from 5% year-over-year in May to 4.9% in June, but prices continued to grow. Most likely, the Fed will not be able to ignore the new inflation data, and it will have to raise rates sooner than expected.

Precious Metals Are Mostly Flat After Inflation Reports
U.S. dollar gained strong upside momentum after the recent inflation reports indicated that Inflation Rate and Core Inflation Rate exceeded analyst expectations.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has managed to get above the nearest resistance level at 92.40 and is currently trying to settle above 92.60.

Interestingly, gold and silver prices were mostly stable after the initial reaction to inflation data, and it looks that precious metals are supported by safe-haven buying, which is good news for gold mining stocks and silver mining stocks.

Treasury Yields Lack Momentum Despite Shocking Inflation Data
The yield of 10-year Treasuries remained unchanged after the release of inflation reports which is a very interesting development. As I noted above, safe-haven buying may have provided support to precious metals, and the same phenomenon is pushing bond prices higher despite strong inflation.

Lower Treasury yields may provide additional support to high-flying tech stocks, and it remains to be seen whether the initial stock market’s reaction will turn into a real sell-off or stocks will be able to gain ground during today’s trading session.

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