Is Wall Street Willing to Shrug Off Highest Inflation in Three Years on 'Better than Expected' Basis? Futures, Gold, Silver Rally on May CPI Release

So much for calling the market.

Admittedly, Money Daily was out over its own skis Tuesday, calling for a session of dip-buying. In reality, there was some, but not before the NASDAQ had dropped nearly 1,000 points before 1:00 pm ET. A 700-point rally took all of the afternoon, leaving the index scarred, bruised, but not broken.

The Dow and NYSE Composite ended the session on the upside, and the S&P closed down less than 20 points. The fear factor was strong enough to send some of the usual suspects - Mag7 and chip stocks - down below Friday's closing levels, though the afternoon recovery pushed them back above water. Not everyone is convinced that Friday's episode was the start of something bigger and more calamitous.

Given the market dynamics of tremendous overvalue, disruptions in the oil flow, and the looming prospect of resumption of full-scale warring in the Middle East, somebody is going to be very wrong. Bulls or bears, and maybe both as wild price swings have brought the VIX above 20, a signal for continued volatility.

Adding to the intrigue is Wednesday's release of May CPI, expected to confirm what everybody already knows: prices are higher, inflation has returned, and the cost of living has grown to be too expensive for what used to be a thriving middle class.

There's good reason to believe that the inflation genie has popped back out of her bottle. The Powell Fed didn't do nearly enough to quell inflation tendencies. They hiked the federal funds target rate to 5.50% in July of 2023, kept it there for another 14 months, declared victory and began easing, without ever hitting their desired level of two percent inflation. It was half-assed policy which managed to appease some politicians and bond buyers, but it was nowhere near enough when inflation had peaked above nine percent according to their own sources and was realistically in a range of 15-20% according to analysts like Shadow Stats, who employ more honest gauges than the Fed and the market do.

With all that baggage in tow, the BLS released the May data an hour before the cash open (8:30 am ET). Here's what they reported:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent on a seasonally adjusted basis in May, after rising 0.6 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 4.2 percent before seasonal adjustment.

The index for energy rose 3.9 percent in May, after rising 3.8 percent in April and 10.9 percent in March. The energy index accounted for over sixty percent of the monthly all items increase. The index for shelter also increased in May, rising 0.3 percent. The food index increased 0.2 percent over the month as the food at home index rose 0.1 percent and the food away from home index increased 0.3 percent.

The index for all items less food and energy rose 0.2 percent in May. Indexes that increased over the month include communication, airline fares, medical care, personal care, and recreation. Conversely, the indexes for motor vehicle insurance, household furnishings and operations, and new vehicles were among the major indexes that decreased in May.

The all items index rose 4.2 percent for the 12 months ending May, after rising 3.8 percent for the 12 months ending April. The all items less food and energy index rose 2.9 percent over the year, following a 2.8-percent increase over the 12 months ending April. The energy index increased 23.5 percent for the 12 months ending May. The food index increased 3.1 percent over the last year.

Not pulling punches even a little bit, the agency pointed out the 23.5% rise in energy over the past year, most of it occurring in just the past three months. U.S. policy regarding Iran is obviously the leading factor and just how much longer the White House and congress will continue their mad escapade is historically measured in years, not weeks or months. It and the costs of maintaining a threatening posture in Ukraine have become the leading causes of financial pain in America. As they say, "this won't end well."

Wall Street may be grudgingly accepting reality, something they rarely do. The U.S. economy is essentially a basket case, producing little more than sketchy narratives, political corruption, and consumer inflation. That doesn't really sound like a winning formula.

Logic would dictate an end to the blooming of new highs on the stock market, but Wall Street doesn't trade in logic; its levers are more emotional in nature. If fear of losses replaces the greed instinct (FOMO) to a generous degree, the cascading waterfall effect could become devastating to investors of all stripes, from billionaire hedge fund bosses to the slave laborer hoping for gains in their retirement account or 401k. As somebody in the newspaper business once quipped: "Retirement? Most of our reporters die right at their desks."

Americans have tied their fates to the Wall Street grinder and Washington's nanny state policies. They ar beginning to see the results and they're not happy. A stock market crash or considerable downturn may be more suffering than the people are willing to endure.

As widely expected, stock futures took the BLS data and turned the worst inflation reading in three years into a positive, citing the usual “Beat Expectations" meme. Dow and NASDAQ futures were each down more than 500 points before the release. Afterwards, a spike higher lopped off more than 250 of the losses.

None of this has been very good for precious metals, as both gold and silver have slipped into bear market conditions. There is joyous celebration at the LBMA and COMEX futures circles. However, both metals turned higher on the CPI release.

Comment of the day: “Here’s your plate of crap. Go buy yourself a plastic fork.”

At the Close, Tuesday, June 9, 2026:
Dow: 50,872.11, +86.10 (+0.17%)
NASDAQ: 25,678.82, -250.84 (-0.97%)
S&P 500: 7,386.65, -19.08 (-0.26%)
NYSE Composite: 23,381.09, +156.89 (+0.68%)