First off, the data: Tuesday's April CPI report indicated prices rose 0.6% monthly and 3.8% annually. The annual increase is the highest since May 2023. Core CPI rose 2.8% annually and 0.4% monthly. Energy costs are front and center, with gasoline up 28%, airline fares up 20%. Wednesday's PPI really surprised markets, with a 1.4% monthly gain (vs. 0.5% expected) and 6% annually (vs. 4.3% expected). Energy costs are a big part of the increase, but other categories also rose, including services, suggesting broader-based price hikes. Treasuries spiked, as the 10-year is now up to 4.60%, up 35 bps since Monday. Fed futures now predict a 60% chance of a rate increase by January 2027. Stay tuned…
