The Federal Reserve's favorite inflation indicator, the PCE Price Index, will be released by the BEA this morning. The index differs from the better-known Consumer Price Index because its composition is changed more frequently and is thus quicker to reflect the impact of real-time pricing fluctuations. In the most-recent report, through February, PCE inflation was reported at 2.5%; by comparison, the latest CPI report, through March, had inflation at 3.5%. Core PCE, which removes volatile food and energy prices, was 2.8% in the latest month, down from 2.9% in the prior month. Our PCE forecasts call for 2.7% for the headline number and 2.8% for the core reading -- roughly in line month-to-month as progress toward the Fed's 2% goal gets harder as the target gets closer. Overall, inflation in this cycle peaked in summer 2022 and has been on a downward trek until plateauing recently. We track 20 inflation measures on a monthly basis. On average, they are indicating that prices are rising at a 2.3% rate year-over-year, up 30 basis points versus a month ago. The numbers are distorted somewhat by ultra-low readings within the Producer Price Intermediate Goods category, which are falling at a 7% rate and may well point to easing prices across the inflation spectrum in the months ahead. Focusing on core inflation -- which we obtain by averaging Core CPI, market-based PCE Ex-Food & Energy (from the GDP report), the five-year forward inflation expectation rate, the 10-year TIPs Break-even Interest Rate, and the PCE Price Index -- our reading is 2.9%, up 12 basis points month-over-month. That's higher largely because sticky prices like shelter and transportation continue to escalate (the Sticky Price Core CPI Index reading is currently 4.5%, up from 4.4% a month ago). Investors are expecting that the Federal Reserve's series of rate hikes ultimately will tame inflation, with the five-year forward expectation rate at 2.38%.

The United States economy is full of innovation. It has to be. Manufacturing industries that dominated the economy decades ago - textiles, televisions, even automobiles to a large degree - have moved overseas, where labor and materials costs are lower. Yet the U.S. economy, even during the pandemic and the current period of high inflation, has expanded to record levels. If U.S. corporations weren't innovating, creating new products (such as vaccines and AI) and services (such as Zoom calls) and moving into new markets, the domestic economy would not be growing, and capital would not be flooding into the country. The current high level of the U.S. dollar relative to currencies around the world attests to the confidence that global investors have in the durable and innovative U.S. economy.

With all the price gyrations since the end of March as well as a few outright nasty days, it sure feels like the major indices already should be in pullback territory of 5% or more. But since its peak on March 28, the S&P 500 has given up 1.8% in eight trading days, the Nasdaq is down 1.6% in 12 days from its March 22 close, and the Nasdaq 100 is off 1.8% since its March 22 all-time high. Almost half of the losses came on Wednesday.

Based in Scottsdale, Arizona, Axon Enterprise, Inc. develops, manufactures, and markets electrical weapons for personal defense. It operates through its TASER segments and Software and Sensors segments. The TASER segment sells electrical weapons, accessories, and other related products and services. The Software and Sensors segment consists of devices, wearables, applications, cloud, and mobile products. The company was founded by Patrick W. Smith.