Consensus -> Fall

• On Tuesday, the S&P 500 edged closer to its all-time high, adding nearly 0.5%.

• The Dow Jones gained 126 points, and the Nasdaq 100 rose almost 0.7%, closing at record high.

• Producer prices surpassed forecasts in April, but the March reading was revised sharply lower.

• Chair Powell's comments at the Meeting of the Foreign Bankers’ Association did not offer any new clues.

• “We did not expect this to be a smooth road.

We get the April inflation report today - there continues to be a lot of noise about "hot" inflation data. For perspective, let's revisit the chart of CPI.

This chart should do nothing to promote fear of another surge in inflation. It's a "stall" in the disinflation trend - if the April monthly change in prices is in line with the consensus view, the year-over-year CPI will fall.

Building on previous discussions, the stall in CPI is largely due to a couple of hot spots in the data (shelter and insurance). On the latter, the auto insurance component was up 22% year-over-year in the March inflation report. Just pulling that out, the headline CPI drops below 3%.

But let’s not pull it out, and instead take a look at what the Progressive CEO said about auto rates in the Q1 earnings call: "Inflationary trends are showing indications of stabilising … It's comforting to be able to report that we're pivoting to a more normalised operation, where in most states we can take small bites of the apple when it comes to rate (i.e. prices) … so, we'll continue to focus on having more stable rates."