Dow went up 20, advances over decliners 5-2 & NAZ added 69.  The MLP index added 1 to the 278s & the REIT index rose 2+ to the 374s.  Junk bond funds were mixed & Treasuries saw a little buying which reduced yields.  Oil was off 1 to the low 78s & gold gained 15 to 2358.

AMJ (Alerian MLP Index tracking fund)

Inflation at the wholesale level rose much more than expected in Apr, the latest sign that price pressures within the economy remain elevated & difficult to tame.  The Labor Dept said that its producer price index (PPI), which measures inflation at the wholesale level before it reaches consumers, rose 0.5% in Apr from the previous month. On an annual basis, prices remain up 2.2%, the highest level since Apr 2023.  While the monthly gain is notably higher than the 0.3% increase forecast, the headline figure is in line with expectations.  In another sign that points to the stickiness of high inflation, core prices, which exclude the more volatile measurements of food & energy, rose 0.5% for the month.  That is higher than both the 0.2% estimate & the gain recorded the previous month.  The figure was up 2.4% on a 12-month basis, in line with expectations.  The data comes one day before the Labor Dept will release the more closely watched consumer price index (CPI), which measures the prices paid directly by consumers.  That report is expected to show inflation rose 0.4% in Apr from the previous month & climbed 3.4% from the same time last year.  Both releases are considered to be important measurements of inflation, with the PPI believed to be a leading indicator of inflationary pressures as costs work their way down to consumers.  The different gauges point to inflation that is still running above the Federal Reserve's preferred 2% target.  The Fed has signaled it is closely watching the inflation reports this week after an increase in price growth during the first qtr of the year forced policymakers to hold interest rates at a 23-year high.  Central bank officials have signaled they expect to cut interest rates this year, but indicated they will not do so until they are confident that inflation is conquered.

Home Depot (HD), a Dow stock, posted quarterly revenue below expectations, as shoppers postponed bigger discretionary projects like bath & kitchen remodels because of higher interest rates & made spring purchases late.  Still, the home improvement retailer reaffirmed its full-year guidance, which includes an additional week from the prior year.  It expects total sales to grow about 1% in fiscal 2024, including those extra days.  However, the retailer said it anticipates comparable sales, which take out the impact of store openings & closures, to decline about 1%, excluding that additional week.  CFO Richard McPhail said customers are in a waiting game that began in the 2nd ½ of last year, as they responded to mortgage rates climbing.  He said the company anticipated those trends would continue.  “The home improvement customer is extremely healthy from a financial perspective,” he said.  “And so it’s not the case of not having the ability to spend. What they tell us is they’re just simply deferring these projects as given higher rates, it just doesn’t seem the right moment to execute.”  Fiscal first qtr EPS was $3.63, down from $3.82, in the year-ago period.  Net sales fell 2.3% from $37.2B.  Comparable sales dropped 2.8% in the fiscal first qtr across the business & declined 3.2% in the US.  HD is contending with a tougher housing backdrop, which has dampened demand for do-it-yourself projects.  About ½ of sales come from DIY customers & the other ½ come from pros like roofers & landscapers.  As interest rates remain high, consumers have been reluctant to move out of their homes ½ into new ones, the kind of turnover that often inspires home projects.  Higher interest rates have also dinged the desire for larger-scale projects that can require financing.  For the past several qtrs, HD has seen customers buy fewer big-ticket items & take on more modest projects, a trend that persisted in the most recent qtr.  In the fiscal first qtr, customers made fewer visits to its stores & website & tended to spend less when they did.  Customer transactions declined 1% to 386.8M & average ticket fell 1.3% to $90.68.  To overcome slower sales, the home improvement retailer has revved up its strategy to attract pros, since they tend to buy larger quantities & offer a steadier source of sales.  HD has a growing network of distribution centers across the country that can store & deliver roofing shingles, insulation & other supplies straight to job sites.  The stock fell 2.30.

Home Depot misses on revenue, as high interest rates hurt sales

The 10-year Treasury yield wavered after wholesale inflation data came in stronger than expected.  The yield on the 10-year Treasury slipped 2 basis points to 4.463% after initially popping above the 4.5% level following the new data.  The 2-year Treasury yield was last at 4.832% after sliding by nearly 3 basis points.  Yields & prices have an inverted relationship & 1 basis point is equivalent to 0.01%.  The closely followed consumer price index for Apr is due tomorrow.  The forecast is expected to show a 3.4% increase in prices from a year ago & a 0.4% rise on a monthly basis.  Following today's PPI reading, Federal Reserve Chair Jerome Powell said that central bank will need to practice patience in the face of inflation that has persisted at higher-than-expected levels.  That comes after the Fed said at its last meeting that there has been “a lack of further progress” in bringing inflation down to its 2% target.  Policymakers have also repeatedly said that they are looking to data for evidence about inflationary pressures cooling before they feel ready to cut interest rates.  The data could, therefore, affect investor expectations about when rates may be cut and how many cuts could come this year.

10-year Treasury yield wavers after release of fresh inflation data

Dow Jones Industrials