Will US April PPI Ease Inflationary Pressure? Short-Term Forecasts for US Stocks, Dollar and Gold

TradingKey - At 8:30 AM ET on May 13, the U.S. is set to release April PPI data. The market generally expects the U.S. April PPI to continue its upward momentum, with consensus pointing to a year-over-year growth rate rising to 4.9%, higher than 4.0% in March; if this data materializes, concerns about the transmission of inflationary pressures upstream will further intensify.

The April CPI data released on Tuesday (May 12) exceeded expectations, with U.S. April CPI rising 0.6% month-over-month and 3.8% year-over-year, and core CPI rising 0.4% month-over-month; following the data release, the three major U.S. stock indices were generally under pressure, with the Nasdaq closing down 0.87%, the S&P 500 and the Dow also performing weakly, the 10-year Treasury yield rose in tandem, and the dollar strengthened.

In this context, the significance of PPI is not just another inflation data point; it acts more as a forward-looking signal for observing subsequent PCE pressure. If PPI continues to be higher than expected this time, it will further demonstrate that medium-to-long-term inflationary pressures are continuing to rise.

For U.S. stocks, the most direct transmission path remains interest rates. If PPI performs better than expected, it means the timing of the Federal Reserve's rate cuts may be pushed further back; meanwhile, the discount rate for tech stocks and high-valuation growth stocks will be raised again.

April's CPI has already caused Wall Street to reassess the interest rate path, with BofA and Goldman Sachs both pushing back rate cut expectations in their latest assessments, even putting the possibility of remaining on hold for the year or even another rate hike at year-end back on the table. If PPI exceeds expectations again, the Nasdaq is likely to come under downward pressure in the short term.

For the dollar, overheated PPI data may reinforce expectations that U.S. interest rates will stay high for longer, meaning that Treasury yields and the dollar will receive support.

Market data shows that following the release of the April CPI, the dollar climbed to a nearly one-week high of 98.46, the 10-year Treasury yield rose 1.16% to 4.46, and market bets on a rate cut before December have weakened significantly. If PPI continues to exceed expectations, the dollar will likely remain strong.

Compared to the dollar and the U.S. stock market, gold ( XAUUSD) reacted more quickly. Under the pressure of yesterday's higher-than-expected CPI data, gold weakened rapidly, with intraday losses once exceeding $50. The market view is generally that as inflationary pressures have risen significantly, rate cut expectations for the year have been drastically compressed; if PPI exceeds expectations again, gold will likely still be under pressure in the short term.

More notably, if the April PPI is strong, it will echo yesterday's CPI; if combined with imported pressures from oil prices, shipping, and the Middle East situation, the market's assessment of the Fed will lean more toward staying on hold or even becoming hawkish. Conversely, if PPI is lower than market expectations, the Nasdaq may see a sentiment-driven recovery, the dollar may pull back, and gold will have the opportunity to rebound as real interest rates decline.