The U.S. has just provided Inflation Rate and Core Inflation Rate reports. Inflation Rate increased by 0.8% month-over-month in April compared to analyst consensus of 0.2%.
On a year-over-year basis, Inflation Rate grew by 4.2% compared to analyst consensus which called for growth of 3.6%. Core Inflation Rate increased by 3% compared to analyst consensus of 2.3%.
S&P 500 futures gained strong downside momentum in premarket trading after the release of inflation reports. Higher inflation is bearish for stocks as the Fed may be forced to reduce its support to markets sooner than expected.
Worries about higher inflation have already put significant pressure on stocks in recent trading sessions, and today’s inflation reports may trigger another sell-off.
Precious Metals Are Under Pressure As U.S. Dollar Gains Ground
Not surprisingly, the U.S. dollar gained upside momentum after inflation reports exceeded analyst expectations. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a basket of currencies, managed to get above the resistance at 90.50 and continued to move higher.
Stronger dollar put pressure on gold and silver, and it remains to be seen whether precious metals’ traditional role as a hedge against inflation will help them in today’s trading session.
WTI Oil Moves Higher As Colonial Pipeline Remains Shut
WTI oil managed to get above the $66 level and continues to move higher as the market is worried about the negative impact of Colonial Pipeline shutdown. Today, traders will learn whether Colonial Pipeline will be restarted after cyberattack or it needs more time to deal with the damage.
However, even a swift restart of Colonial Pipeline will not solve near-term problems with gasoline shortage in certain areas. Meanwhile, gasoline prices have averaged above $3.
I’d also note that the number of new COVID-19 cases in India dropped in recent days which serves as an additional bullish catalyst for the oil market.