Equity markets cheered a weaker than expected CPI report and advanced the S&P 500 by more than 2.0% at the high of the day because of it. While good news, investors are cautioned not to become overly bullish in light of the trend in inflation. The CPI data was weaker than expected but still hot at nearly 6.0% YOY at the core level. At this rate, the FOMC can be expected to hike rates by at least 50 basis points at the next meeting and the peak of inflation is yet to be official. At best, inflation has been trending at the current levels for a few months now and points to ongoing pain at the register for consumers of all types.

Next week we'll get a fresh read on consumer spending in the form of retail sales. The takeaway from the news, however, is likely to support the idea that volume sales are in decline and the difference in growth is due to higher prices and inflation. The message to investors is that activity is slowing on a currency-neutral basis and the decline could accelerate given the expectation for FOMC interest rate hikes.