Before we jump into today’s Market 360, I wanted to thank everyone who joined me live Tuesday evening for my Emergency Banking Briefing.

It was great to have you there… and to be able to answer some of your most pressing questions about the ongoing regional bank crisis. As I shared last week, I rarely – if ever – recommend that my readers buy banking stocks.

But as I talked about in detail during Tuesday night’s live event – that’s especially true now.

I believe the recent trouble with the banks is just beginning, and we’re about to see a historic “$8.3 Trillion Banking Shock.”

If you missed Tuesday’s briefing, simply click here for the replay.

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Now, banking news took a bit of a backseat earlier this week… with the consumer and wholesale inflation reports taking center stage.

Specifically, Wall Street was waiting on April’s Consumer Price Index (CPI) numbers, which were released yesterday, and April’s Producer Price Index (PPI) numbers, which were published this morning.

While the actual numbers weren’t expected to fall much, there were some key components I had my eye on: Owners’ Equivalent Rent (OER) in the CPI and service costs in the PPI.

In today’s Market 360, we’re going to review this week’s inflation reports – and what they mean for the direction of the economy (and stocks) for the rest of the year.

April’s CPI

Yesterday morning, the Bureau of Labor Statistics reported April’s CPI numbers. Headline CPI rose 0.4% month-over-month and 4.9% year-over-year. This marks the slowest annual rate increase in two years.

That’s a clear deceleration.

But as I mentioned, I was most concerned with what was in the details.

OER, which is how housing costs are tracked in the CPI, only rose 0.4% in April. This is down from the 0.6% rise in March and the 0.8% increase in February.

The fact is the lower housing costs and easing rental costs in some markets are finally, finally showing up in the CPI data. This was a very welcome change.

And there was another little silver lining…

Service prices only rose 0.1%.

The core CPI – which measures the price of goods minus the costs of food and energy – rose 0.4% month-over-month and 5.5% over last year.

Both headline and core CPI were in line with economists’ expectations.

The bottom line: We’re finally seeing some of the key components of inflation starting to crack, and that’s good news.

April’s PPI

The Bureau of Labor Statistics reported the PPI rose 2.3% year-over-year in April, below expectations for a 2.4% increase. This is also lower than the 2.7% rise in March and the lowest reading since January 2021.

(Remember, PPI measures the cost producers pay for goods and services.)

The core PPI, which excludes food, energy and trade, came in at 3.2% – also lower than expectations.

You may recall, the big development there in March was that service costs fell 0.3%. That was not the case in April…

According to the report, service costs rose 0.3% in April – the largest rise since November 2022.

The Labor Department very bluntly said that service costs are accounting for 80% of the wholesale inflation.

The bottom line: The headline number is good. The components are not good.

As I said on CNBC Singapore last night, a year ago in May and June, inflation was a bit out of control. The CPI was up 0.9% in May of 2022. In June 2022, it was up 1.2%. As we get the new inflation data, we’re going to start cutting off those big months. Then inflation will be at a 3% annual pace on the CPI. You can see on the wholesale pace – the PPI – is already below 3%. That will start trickling down to the consumer in the months to follow.

So while an increase in service costs was not what I was hoping to see, over all the numbers show inflation is cooling.

The Fed’s Next Move

Now that we’re starting to see some good inflation numbers this week, it will take more pressure off the Federal Reserve to continue raising key interest rates.

As far as I’m concerned, the Fed’s done. They shouldn’t raise rates anymore. In fact, they shouldn’t have raised rates last week.

Outside of inflation, another big concern of the Fed is the renewed volatility hitting the banking industry.

Regional bank stocks have remained volatile since last week due to concerns about deposits.

In fact, as I write this morning, shares of PacWest Bankcorp (PACW) are down 25% in the wake of the bank’s announcement that deposits dropped 9.5% last week. PacWest said that the outflows of cash started after news hit that the bank was “exploring strategic options.”

Furthermore, there has been talk that short sellers have been putting regional banks under pressure since the fall of Silicon Valley Bank back in March. There are even whisperings as to whether the Securities and Exchange Commission (SEC) should halt the short selling of regional bank shares.

And it wouldn’t be unheard of. In 2008, the SEC banned short selling on more than 1,000 banking stocks.

Look folks, as I shared at the live Emergency Banking Briefing Tuesday night… this is just the start.

During the briefing, I covered all the details and why a historic “$8.3 Trillion Banking Shock” could happen sooner then we all think. And I shared how you can prepare yourself for what’s next.

Plus, during the event I answered some of your most pressing questions.

If you missed it, click here for the replay.

Sincerely,

Louis Navellier

P.S. On Tuesday night, I went live on camera to reveal the cold hard facts about the recent banking crisis and revealed 3 things you can do to protect your cash from any future bank failures…

I called the collapse of Silicon Valley Bank and First Republic months before they caught millions of Americans off guard.

And now I’m making what could be the biggest call of my career…

There is no time to waste.

Please click here to watch my Emergency Banking Briefing to prepare for what’s to come…