Cannon Trading Futures Blog: Daily Support and Resistance Levels

U.S. April Consumer Prices Rise 0.6%; Core Rises 0.3% May 17 Prices paid by U.S. consumers rose more than forecast in April, rekindling inflation concerns that may invite more interest- rate increases from the Federal Reserve. The 0.6 percent rise in the consumer price index followed a 0.4 percent increase in March, the Labor Department said today in Washington. Not counting food and energy, so-called core prices rose a larger-than-forecast 0.3 percent for a second month. Strong demand is allowing more companies to pass along higher commodities and wage costs. Today's data will likely dispel any reassurance Fed policy makers took from recent reports on producer and import prices showing limited inflation, economists said. ``Inflation is starting to gather momentum, and I don't see any reason to believe it's going to reverse this upward trend,'' said Richard Yamarone, chief economist at Argus Research Corp., who correctly forecast the rise in core prices. ``We have higher raw materials and commodities prices, and businesses are saying they're passing those along. Now we have the evidence.'' Economists expected a 0.5 percent increase in the consumer price index, based on the median of 72 forecasts in a Bloomberg News survey. Forecasts ranged from 0.4 percent to 0.9 percent. Core prices were forecast to rise 0.2 percent. After the report, the yield on the benchmark 10-year Treasury note rose 7 basis points to 5.16 percent as of 8:50 a.m. in New York. Earnings Jump Average weekly earnings adjusted for inflation rose 0.2 percent in April and are up 4.1 percent over the last 12 months, the Labor Department said in a separate release. Consumer prices were up 3.5 percent for the 12 months ended in April compared with a 3.4 percent year-over-year gain the previous month. Core prices were 2.3 percent higher, the biggest year-over-year gain since March 2005, compared with a 2.1 percent 12-month gain a month earlier. So far this year, consumer prices are rising at an annual rate of 5.1 percent, compared with a 4.6 percent pace in the same four months last year. Core prices are rising at a 3 percent rate, compared with a 2.6 percent increase during the same time in 2005. Today's report is the last of three releases on April inflation. Yesterday, the government said producer prices excluding food and energy rose 0.1 percent for a second month, less than forecast. The costs of imported goods excluding petroleum edged up 0.1 percent in April, the Labor Department said on May 12. Inflation in Europe Inflation is also accelerating in Europe. Consumer prices in the dozen nations sharing the euro rose 0.7 percent in April from March, the European Union's Luxembourg statistics office said today. That advance was higher than expected and the fastest since March 2005. Consumers paid 3.9 percent more for energy in April after a 1.3 percent increase a month earlier. Fuel costs were up 17.8 percent in the last 12 months. Gasoline prices rose 8.8 percent in April and natural gas costs fell 5.2 percent. Food prices, which account for about a fifth of the index, were unchanged in April after a 0.1 percent gain. The cost of all goods including cars, apparel and food rose 1.1 percent last month after rising 0.6 percent in March. Goods prices are 3.2 percent higher compared with April 2005. The consumer price index is the government's broadest gauge of costs for goods and services. Almost 60 percent of the CPI covers prices consumers pay for services, ranging from medical visits to airline fares and movie tickets. Service prices rose 0.2 percent and are up 3.7 percent over the last year. The cost of medical care rose 0.4 percent for a second month. Housing costs, which include some energy costs, rose 0.1 percent after rising 0.2 percent. Rental Prices A category designed to track rental prices rose 0.4 percent for a second month. Rents have lagged behind home prices for years as low borrowing costs fueled a boom in housing. With growth in home prices slowing and mortgage rates rising, demand for rental units is starting to rise. The government tracks two rental categories, one from observations of actual home and apartment rents and another designed to impute a rental value on owner-occupied homes. Together, they account for 29 percent of the consumer price index and almost 40 percent of core prices. By comparison, energy accounts for 8.7 percent of the CPI. Airfares rose 1.6 percent last month. The cost of hotel stays was unchanged following a 0.8 percent rise. Toronto-based Four Seasons Hotels Inc., the world's largest operator of luxury hotels, said it raised room rates 7.2 percent in the first quarter. Gasoline Unleaded gasoline at the pump averaged $2.74 a gallon in April, up from $2.42 a gallon in March, according to figures from the Energy Department. Retail gasoline climbed in April to the highest since September's record $3.069 a gallon, following Hurricane Katrina. Higher costs for energy and other commodities pose a risk that they will be passed on to consumers. Some companies are already having success. Con-way Inc., the largest U.S. regional trucking company, expects to raise rates this quarter more than in the first quarter as it extends higher prices to more customers, Chief Executive Officer Douglas Stotlar said. Rates including fuel fees will rise in the ``mid-single digits,'' after climbing 2.3 percent in the first quarter, he said in a May 12 interview. Discounting Companies in industries ranging from autos to computers are still offering discounts to lure buyers. Ford Motor Co. and DaimlerChrysler AG's Chrysler added no-interest loans on some vehicles and General Motors Corp. Detroit-based GM, the world's largest automaker, said that in the Chicago and Minneapolis areas it will offer a $1,000 fuel card with the purchase of some new models. Cruise operators including Miami-based Carnival Corp. are reducing fares to spark demand amid concern that consumers facing higher gasoline prices will rein in spending on other goods and services. The Federal Open Market Committee's statement last week said the timing of interest rate moves will depend on data released before central bankers next meet on June 28-29. Economists surveyed by Bloomberg News earlier this month expect the Fed to hold the overnight rate at 5 percent through the first half of next year. A survey, released yesterday, of economists by the Federal Reserve Bank of Philadelphia found little evidence of rising expectations for inflation. The forecasters said inflation as measured by the consumer price index will average 2.6 percent this year, when measured fourth quarter to fourth quarter. Consumer prices will rise 2.4 percent in 2007. Sincerely, Ilan Levy-Mayer, M.B.A Vice President Cannon Trading Co Inc. http://www.cannontrading.com http://www.E-Futures.com ilan@cannoncapital.com Yahoo IM ilanlevy1970 310-859-9572 800-454-9572 Fax 310-859-0547 9301 Wilshire Blvd. Suite #614 Beverly Hills, Ca 90210 The finest compliment I can receive is a referral from a trusted client. * Important Please Note: Trading commodity futures and options involves substantial risk of loss. The recommendations contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.