To The Moon

US wholesale inflation report (producer price index PPI) was released on Thu, 12 Jun 2025, a day after the consumer inflation report.

Like its CPI cousin report, US wholesale inflation rose marginally in May 2025, driven in part by costlier goods. Tariff-related effects were largely muted.

Producer Price Index.

Headline inflation.

• Monthly: came in at 0.1% vs 0.2% expected vs April’s -0.2%.

• Annual: was 2.6% vs 2.6% expected vs April’s upwards revised 2.5%

Core Inflation.

• Monthly: came in at 0.1% vs 0.3% expected vs April’s upwards revised -0.2%.

• Annual: was 3.0% vs 3.1% expected vs April’s upwards revised 3.2%.

According to the media, latest PPI readings show US wholesale inflation is slowing, with producer prices rising less than expected, implying inflation is easing and is unlikely to spike soon.

Personally, I think both headline and core PPI monthly readings were pretty “high”.

• Both “monthly headline & core inflation” went from -0.2% to 0.1%. This means it has increased by +0.3% to reach the 0.1% reading.

• Isn’t a +0.3% monthly increment considered “high” and calls for concern?

Wall Street Explains.

Wall Street analysts offer 3 reasons that have conspired to keep both consumer and wholesale inflations benign:

• Companies hoarding imported goods ahead of the April 2 tariff announcement.

• The time it takes for the charges to make their way into the real economy.

• The lack of pricing power companies face as consumers tighten belts.

They still hold the view that over the coming months, prices will continue to rise as long as the tariff issue remains unresolved and uncertainty persists.

US Weekly Jobless claims.

Besides wholesale inflation report, the other “important” reports of the day were Jobless Claims - (a) Weekly and (b) Continuing. (see below)

(a) US Weekly jobless claims.

• For week ending 07 Jun 2025, initial jobless claims in at 248,000, unchanged from the previous week's revised level. (see above)

• Economists had expected jobless claims to dip to 242,000 from the 247,000 originally reported for the previous week.

• Jobless claims are at its highest since hitting 259,000 in the week ended 5 Oct 2024.

• 4-week moving average rose to 240,250, an increase of +5,000 from the previous week's revised average of 235,250.

• Similarly, the 4-week moving average reached its highest level since hitting 245,000 in the week ended 26 Aug 2023.

(b) US Continuing claims.

• For week ending 31 May 2025, continuing claims increased by 54,000 to a seasonally adjusted 1.956 million, the highest level since 13 Nov.

• Economists had expected continuing claims to increase to 1.91 million from 1.902 million reported for the previous week

• The increase lifted continuing claims to highest level since hitting 1.970 million in the week ended November 13, 2021.

• 4-week moving average of continuing claims also reached its highest level since November 2021, rising by 19,750 to 1.9145 million.

• Laid-off workers are struggling to find work.

US market on 12 Jun 2025

Despite the two weak economic reports, US market decided to turn a blind eye to them, just as they did to CPI and rally just after midday. (see above)

By the time market called it a day:

• DJIA : +0.24% (+101.85 to 42,967.62)

• S&P 500: +0.38% (+23.02 to 6,045.26).

• Nasdaq: +0.24% (+46.61 to 19,662.49).

US market is expected to fall on Fri, 13 Jun 2025 following Israel surprised attack of Iran. (see below)

US stock futures dropped sharply with the Dow, S&P 500, and Nasdaq futures all declined by over 1.0%. (see below)

This reflects a significant shift in investor sentiment as escalating Middle East tensions stoked fears of broader conflict and possible disruptions to oil supply, causing crude prices to spike by over 6% and gold to rise as investors sought safer assets.

In a blink of the eye, $Energy Select Sector SPDR Fund(XLE)$ and $SPDR S&P Aerospace & Defense ETF(XAR)$ (defense stocks) saw notable gains in premarket trading, while $Technology Select Sector SPDR Fund(XLK)$ and broader market indices suffered losses

Given the suddenness and severity of the geopolitical shock, US market is likely to close lower on Friday, with heightened volatility and risk-off behavior dominating trading sessions.

In The Coming Week.

Market sentiment is expected to remain cautious & volatile heading into the following week, especially if Iran’s promised retaliation materializes or if there are further escalations.

Analysts anticipate ongoing risk aversion.

Investors will need to closely monitor:

• Developments in the Middle East.

• Potential disruptions to oil supply.

• Any impact on US interests or personnel.

Negative market sentiment triggered by the Israeli attack is likely to persist into next week, with the potential for further volatility as the situation evolves. What a difference a day makes !

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