Inflation Looks High, But May Have Peaked

The market opened under a bit of pressure, after the most recent inflation report sparked concerns about the economy. But inflation is a lagging indicator, and with economic growth slowing around the globe, and energy prices coming down well off their highs, it is likely that inflation has peaked for the time being.

As this realization set in, the market has bounced back, and the Nasdaq is up nearly +1.0% currently. Homebuilders and bank stocks are leading the way, while energy shares are lower after profit taking from the recent rally.

The July CPI index climbed +5.6% yr/yr, but when you exclude food and energy, the core CPI rose +2.5% yr/yr, still higher than the consensus of +2.4%.

There was a small flurry of merger news this am. Wells Fargo (WFC) said it was buying Century Banchsares, Skechers (SKX) offered to buy Heelys (HLYS), and UnionBanCal (UB) refused a $63 buyout offer from Mitsubishi UFJ Financial.

In earnings news, Wal-Mart (WMT), Smuckers (SJM), and Urban Outfitters (URBN) all topped expectations, and are helping the retail stocks bounce.

Asian markets were mixed overnight, with Japan lower but several other markets higher. Oil is higher so far this morning, adding to yesterday's gains. The dollar is also a bit stronger vs. the Yen and the Euro. And the 10-year yield is steady at 3.90%.

long QLD