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Tomorrow, May 10, brings the key CPI inflation report for April. Economists surveyed by Bloomberg are projecting that headline inflation will rise at a 5% year-over-year rate. That would match the 5% headline rate for the Consumer Price Index in March. The headline rate would remain so elevated because of a rise in oil prices in April after OPEC+ announced a drop in crude production.

Month-to-month headline CPI inflation is expected to have climbed by 0.4% in April after a 0.1% month-to-month increase in March.

The Federal Reserve watches the core rate, which strips out the costs of food and energy. Here too economists are not expecting a significant drop in inflation. Core inflation is projected to have climbed at a 5.5% rate against the 54.6% rate projected in March. Month-to-month the core rate is expected to have climbed by 0.4% after a 0.4% increase in March.

Anything stronger than these projections is likely to push stock and bond prices down. The Fed has said that its decision on raising interest rates again at its June 14 meeting is data-dependent. And inflation at those projected levels would leave the Fed looking at an economy and labor market that is still way too hot for much progress on hitting the central bank’s target of 2% inflation.

This market has shown a persistent ability, however, to hold onto its belief in interest rate cuts from the Fed “very soon.”

And I’m not convinced that even this evidence of continued high inflation will be enough to shatter that conviction.

However, there were some signs of nervousness–even if not a lot of worry–in trading today.

Gold climbed another 0.44% on the day to $2042.20 an ounce for June delivery. The yield on the 10-year Treasury pushed up above 3.5% to 3.52% on a 2 basis point rise in the yield. The 2-year Treasury climbed above 4.03%; it had been 3.98% on May 2. The shorter end of the Treasury market continued to trade with yields above 5% at 5.13 for the 6-month bill and 5.20% for the 3-month issue.

The VIX fear index, the CBOE S&P 500 Volatility Index, closed p 3.83% at a still very low 17.63.

The S&P 500 closed off 0.41% and the Dow Jones Industrial Average ended the day down 0.17%. The NASDAQ Composite was lower by 0.63% and the NASDAQ 100 ended 0.68% lower. The small-cap Russell 2000 was off 0.27%.