To The Moon

On 11 May 2026, I have presented a summary of all the Jobs reports out the week before (click here ! for the details) and wondered aloud how the inflation reports will affect US market.

The week has come and gone, and I think most of us know what has happened.

Here’s my recap, along with new developments that may affect the US market, going forward.

US Consumer Inflation (April 2026.)

April’s inflation data set the stage for the week ending Sat, 16 May 2026.

The April 2026 CPI report from US Bureau of Labour Statistics (BLS) revealed a hotter-than-expected inflation picture. (see below)

(a) Consumer Price Index (CPI).

• Headline monthly CPI was : +0.6% vs market consensus of 0.6% vs March’s +0.9%, that’s about one third lower than previous month.

• Headline annual CPI was: +3.8% vs analysts’ expectations of 3.7% vs March’s 3.3%, that’s about +15.15% higher.

(b) Core CPI.

Core CPI, that is stripped of volatile components food & energy, also broadened unexpectedly:

• Core monthly CPI advanced by 0.4% vs Wall Street estimates of 0.3% vs March’s 0.2%; that’s a +100% increase MoM.

• Core annual CPI climbed to an annual rate of 2.8% vs market estimates of 2.7% vs March’s 2.6%; that’s a +7.69% increase.

No prizes for guessing Energy being the key inflation catalyst that accounted for over 40% of the headline increase.

Gasoline alone surged +28.4% YoY, with direct pass-through primarily driven by shipping disruptions in the Strait of Hormuz from the US-Iran war; that is coming to 3 months old soon.

Surging energy prices have bled into supply chains, raising the cost of utilities and transportation and causing food-at-home costs to rise 0.7% in April 2026.

For Core CPI - shelter component (that represents a huge portion of core CPI) increased by 0.6%.

Nearly 50% of spike was a mechanical, one-off catch-up adjustment by the BLS used to compensate for data collection missed during late-2025 US government shutdown.

US Producer Inflation (April 2026).

Like April’s consumer price index, US headline and core Producer Price Index (PPI) surged well above expectations. (see below)

(a) Producer Price Index (PPI).

• Headline monthly PPI was +1.4% vs market consensus of 0.5% vs March’s +0.7%, that’s +100% increase from previous month.

• Headline annual PPI was: +6.0% vs analysts’ expectations of 4.9% vs March’s 4.3%, that’s about +39.53% higher.

(b) Core PPI.

• Core monthly PPI advanced by 1.0% vs Wall Street estimates of 0.3% vs March’s 0.2%; that’s a +400% increase MoM.

• Core annual PPI climbed to an annual rate of 5.2% vs market estimates of 4.3% vs March’s 4.0%; that’s a +30.0% increase.

Like April’s CPI, a massive 7.8% jump in final demand energy (including a +15.6% spike in gasoline) was the primary driver of the headline PPI shock, severely impacting goods prices.

Core inflation pressures intensified across the supply chain, indicating that price hikes are no longer localized to commodities.

Besides that, Service sector costs accelerated significantly, seeing a +1.2% increase.

This was heavily influenced by a +5.0% surge in transportation and warehousing costs (with truck freight up 8.1%).

Energy Price now ?

The inflationary spike, a direct consequence of the US-Iran clash will be crossing the 3-month mark, in 2 weeks’ time.

With US officially rejecting Iran’s 14-point mitigation plan (see above) on Fri, 15 May 2026 and the lack of a clear path to resolution - once again put the Straits of Hormuz back in focus and in the hot seat.

This as Trump once again, piled pressure on the possibility of a fresh attack (that many in the press says, will determine the outcome of his mid-term election) - an attack that he could ill afford.

It is very certain that the global Energy crisis is going to be here easily at least for another month or two.

This also mean oil prices will not ease in the near term.

It is still hard to wrap one’s head around the fact that crude oil price was barely above $60 in late February 2026 and its now above $100 in the latest instance.

US Retail Sales (April 2026).

US retail sales report that gauges US consumers’ sentiments was released on Thu, 14 May 2026. (see below)

For April 2026 it has reached an advance estimate of $757.1billion.

This represents a +0.5% MoM increase, in lined with Wall Street estimates and a +4.9% YoY increase.

Because the data has not been adjusted for inflation, much of the growth was driven by surging gas prices rather than an increase in the volume of goods sold.

Assuming inflation is factored in, actual consumer purchasing volume for April 2026 would have fallen roughly by -0.2%, indicating underlying strain on households.

Whichever way the report is being looked at, it still points to positive consumer spending momentum, but the real & actual purchasing power look softer than nominal headline suggests.

With inflation picking up pace, US sales report is less about accelerating volumes and more about consumers spending more dollars to buy roughly the same basket.

That keeps the data supportive for near-term consumption, but not strong enough to imply a broad re-acceleration.

Outlook for this report over the next 3 months should remain in modest growth in nominal retail sales, but uneven underlying momentum.

Jobless Report.

US Dept of Labour’s jobless claims reports revealed a labour market that is weathering broader macroeconomic and geopolitical pressures with moderate stability, while remained anchored in economists termed "low-hire, low-fire" state.

(a) Weekly jobless claims.

For week ending 09 May 2026, weekly jobless claims rose by +12,000 to 211,000 from last week’s downwards revised 199,000.

Latest data is also higher than Wall Street’s estimates of 205,000.

4-Week Moving Average also increased by +750 to 203,750. (see below)

Although the 12,000-claim jump from previous week's sub-200k level looks like a softening, the broader context shows that weekly claims have remain structurally low.

Historically, any reading hovering near the 200,000 threshold points to a remarkably low volume of corporate layoffs.

Soaring producer prices (PPI) and commodity disruptions affected imports like petrochemicals, aluminum, and fertilizers, leading to specific industrial sectors are likely pulling the brakes on operations.

This is the primary driver behind the mild uptick, bleeding out from the dragged-out Middle East conflict.

(b) Continuing jobless claims.

For week ending 02 May 2026, continuing claims increased by +24,000 to a seasonally adjusted ​1.782 million, the strongest weekly increase since February 2026, but the level is still near the lower end of its range since mid-2023.

Latest number is marginally lower than market consensus of 1.79 million and higher than last week’s downwards revised 1.758 million. (see above)

On the other hand, 4-Week Moving Average fell by -6,750 to 1.781 million from the prior week, suggesting absolute volume of beneficiaries remains well-contained, but the momentum to push this number structurally lower has stalled.

Latest pushback erased the brief dip to 1.1% seen in the week ending 25 Apr 2026, returning the insured unemployment rate to the steady 1.2% range it has occupied since late 2025.

The week’s continuing claim’s upward movement highlights the "low-hire" side of the current economic equation.

Companies have significantly slowed down their recruitment pace due to lingering high interest rates, geopolitical uncertainty, and cost pressures.

Overall, US labour market is cooling more through slower re-employment than through a surge in layoffs.

Looking ahead for the rest of May 2026, weekly claims should stay in a relatively tight band, while continuing claims may drift higher especially if hiring remains selective.

The main risk is not a sharp spike in layoffs, but an even slower absorption of unemployed workers, especially when (a) energy prices rise even higher and (b) narrowing business margins make companies hyper cautious about adding staff.

Rise of Treasury Yields.

US’s macroeconomic landscape has darkened noticeably following the inflation data released, supported by other US economic reports.

This data has reignited fears of structurally higher inflation and prompted a sharp repricing of fixed-income assets. (see below)

On Wed, 13 May 2026 and Thu, 14 May 2026, the US 30-year Treasury bond yield returned to a prominent peak, breaching the 5.0% threshold to close around 5.01%.

The same happened for 10-years and 20-years Treasury yields as well.

Final snapshot of all 3 Treasury Yields as of 18 May 2026, Asia time 12noon:

• 10 years Treasury yield stood at 4.629%.

• 20 years Treasury yield stood at 5.176%.

• 30 years Treasury yield stood at 5.155%.

Rising Bond Yield Siphon Funds From US Stocks ?

The short answer is yes, but with a structural delay, with the phenomenon is driven by asset allocation dynamics & valuation models.

When the 30-year Treasury yield moves above 5.0%, it alters the fundamental risk-reward calculus of global multi-asset portfolios.

One cannot dismiss that a guaranteed 5% return backed by the US government provides a highly compelling alternative to volatile equities.

Based on textbook theory - as bond yields rise while equity valuations remain high, the extra return investors expect for taking on the risk of holding stocks shrinks.

When the Equity Risk Premium (ERP) compresses to historical lows, conservative institutional money naturally rotates out of equities and "siphons" into fixed income.

The extent of US market cooling can be analyzed through 2 distinct lenses of (a) corporate fundamentals and (b) systemic liquidity- complex mathematic calculus that will not be covered in this post.

In short, a rising bond yield will cool down US market, but the cooling process is proving to be highly asymmetrical.

The market is undergoing a stark bifurcation.

The rate-sensitive, highly leveraged, and traditional cyclical components of the economy are already cooling rapidly under the pressure of tight financial conditions.

However, the secular AI-led technology trade acts as an insulating bubble.

For the cooling effect to become absolute across the entire index, 1 of 2 things must occur:

• Either the macro drag from $105 oil and 5% yields must begin to visibly dent the corporate enterprise spend on AI.

• Or the fixed-income yields must rise to a threshold so restrictive (e.g., mid-5%) that institutional asset rotation out of mega-cap tech becomes an absolute necessity.

Given the structural trajectory of the April 2026 inflation data, US market appears to be on a direct collision course with that restrictive threshold.

So, do we continue to bet “big” on AI and hope that it will turn in profits OR do we continue to seek “resilient” sectors that will stand the test of time ?

Big decisions to ponder and maybe execute while keeping an eye on US Treasury yields, as it edge towards the 5.5% level. True, you think ?

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