Dreams Of A Rate Cut???? – Flat Core PPI Fuels Rally

“On the inflation front, the trend appears to be down, instead of holding steady, for the first time.  We can live with the economic weakness [implied by the retail sales numbers] if we’re getting inflation under control.”

– Marc Pado, US market strategist Cantor Fitzgerald (subscription required)

The Commerce Department this morning released two widely followed economic reports: Montly Retail Sales and Producer Price Index (PPI). 

The PPI came in up .7% from March but the big number was that core PPI, which excludes food and energy, came in flat from March – for the second straight month (pg. 1, Table A). 

Retail Sales were weak, down .2% from March – though March was revised up from .7% to 1.0% (pg. 3, Table 2). 

I think Marc Pado gets it right as far as the market’s interpretation goes: if inflation is under control, that means the Fed can focus on slowing growth i.e. a rate cut.

Consumer Price Index (CPI) for April is out next Tuesday before the open so that will be important to watch.

As of (9:30am PST):

Dow: +88, 13303

S&P: +10, 1502

Nasdaq: +21, 2554.6