Sean Williams, The Motley Fool
4 min read
For most investors, earnings season is the pinnacle of each quarter. The six-week period where most S&P 500 (SNPINDEX: ^GSPC) companies lift the hood on their quarterly operating results provides insight into the health of corporate America and the sustainability of bull and bear markets on Wall Street.
But something even more important than earnings releases is slated for today, and it has the potential to rattle the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500, and Nasdaq Composite (NASDAQINDEX: ^IXIC). Investors, buckle up, because it’s inflation report day!
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Inflation is rapidly picking up in the wake of the Iran war
According to outgoing Fed Chair Jerome Powell, whose final day as head of the Federal Reserve is this Friday, May 15, the U.S. economy is navigating two price shocks: President Donald Trump’s tariffs and the Iran war.
It’s been more than two months since Trump gave the U.S. military the green light to commence attacks against Iran. Since roughly Feb. 28, Iran has closed the Strait of Hormuz to virtually all commercial vessels. This stoppage has stymied approximately 20% of the world’s daily liquid petroleum supply — the largest energy supply disruption in modern history.
The most immediate impact of this war has been felt at the fuel pumps, where gas prices have jumped at their fastest pace in over 30 years. But this is likely just the tip of the iceberg.
Historically, the impact of energy price shocks on businesses lags by a couple of months. When higher transportation and production costs begin working their way into economic data, a second inflationary surge can often be identified.
In February, the U.S. Bureau of Labor Statistics (BLS) reported trailing 12-month inflation of 2.4%. One month later, the impact of the Iran war pushed the TTM Consumer Price Index (CPI) up 90 basis points to 3.3%.
According to estimates from the Federal Reserve Bank of Cleveland’s Inflation Nowcasting tool, the CPI is expected to jump by 26 basis points to 3.56% in April. The BLS will release the April inflation data at 08:30 a.m. ET, today (May 12).
