Falling Inflation Expectations, Rising Wage Gains: Fed's Balancing Act

Falling Inflation Expectations, Rising Wage Gains: Fed's Balancing Act
Falling Inflation Expectations, Rising Wage Gains: Fed's Balancing Act

Powell Points to Falling Inflation Expectations, but Wage Gains Complicate Fed Path

Federal Reserve Chair Jerome Powell stressed the significance of falling inflation expectations on Wednesday. Powell noted that consumers expect inflation to decline to 2.9% in the next year, down from expectations of 3% in February. He emphasized that this is a welcome sign in bringing inflation back down to the Fed's 2% target.

However, Powell acknowledged that wage growth could complicate the Fed's path. New data from ADP showed a median year-over-year pay increase for job switchers of 10% in March, the highest rate since July 2023. While this is a positive sign for the economy, it could also put upward pressure on consumer demand and prices.

Energy Sector Leads S&P 500 Gains as Inflationary Pressures Persist

Energy stocks continued to drive the S&P 500's performance on Wednesday, with the sector handily outperforming the index this year. Strategists believe the gains may not be over. DataTrek Research noted that Energy is still chasing the S&P 500, indicating potential for further near-term gains.

The continued strength in energy prices has provided a hedge against geopolitical risks, such as the ongoing conflict in Ukraine. Moreover, oil prices have stabilized, a necessary precondition for sector outperformance.

Disney Defeats Activist Investor Nelson Peltz in Proxy Fight

Walt Disney Co. (DIS) successfully fended off activist investor Nelson Peltz in his bid for board seats at the company. The results, announced during Disney's annual meeting of shareholders on Wednesday, confirmed that the current Disney board will remain intact following a shareholder vote that gave Disney a win "by a substantial margin."

The victory represents a short-term win for Disney, ending months of uncertainty and distraction for the company and its CEO Bob Iger. However, the board will face pressure to deliver results as Disney navigates consumer shifts away from traditional cable packages and into mostly unprofitable streaming services.

Ford Reports Strong Sales Jump, Shares Rise

Ford Motor Company (F) reported a 6.8% increase in Q1 US sales to 508,083 vehicles. The surge was powe

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