For the U.S. stock indices, May is closing with a bang. At the midway point of the Wall Street session, the DJIA DOW (+146), S&P 500 SPX (+13), and NASDAQ (+26) are all in the green. Although the intrasession gains aren’t huge, a set of positive economic numbers is fueling optimism.

Without further ado, here’s a look at this morning’s key reports:

Event                                                    Actual                     Projected           Previous

Continuing Jobless Claims                   3.642M                   3.680M               3.738M

Initial Jobless Claims                             406K                       425K                     444K

GDP (QoQ, Q1)                                         6.4%                       6.5%                    6.4%

Core PCE Prices (Q1)                              2.50%                      2.30%                  1.30%

In short, this group of figures suggests that inflation is growing as is economic output. Jobless claims continue to fall and are on pace to reach a relative state of normalcy by year-end 2021. Also, GDP is solid, coming in above 6%. However, the real headliner is Q1’s Core PCE Prices. This figure came in at 2.50%, outpacing projections (2.3%) and nearly doubling the previous release (1.30%). 

Make no mistake, inflation is now here. And, although the Fed believes it is “transitory” in nature, no one is 100% certain. The bottom line is this: unlimited Fed QE and roughly $5.6 trillion in U.S. government stimulus have been dumped on the economy in the past 14 months. The ultimate impact of these actions cannot be projected. For the American indices, prices continue to grind higher as businesses and consumers can’t get enough of that cheap capital.

American Indices Drive Toward All-Time Highs

At press time, the Dow Jones Industrial Average is leading the indices higher. As May rolls to a close, it appears that stocks are committed to posting a very nice Summer 2021.

Overview: Perhaps the single best indicator that things are good for the U.S. equities indices is the quiet CBOE Volatility Index (VIX). Current readings show the VIX at 16.85, down from January’s high of 36.15. So, inflation is up and Wall Street’s “fear gauge” is down. Given these two inputs, a bullish bias is warranted toward trading U.S. stocks until the Fed moves off its unlimited QE convictions.