CPI Weighs on Markets Facing Pressure Over Strait of Hormuz Uncertainty

• April CPI data exceeded expectations, with headline year-over-year at 3.8% and core month-over-month at 0.4%, driven by increases in energy, food, and particularly services like shelter and transportation.
• The hotter inflation print is complicating the Fed's potential dovish stance, leading to higher bond yields and a broad sell-off in equity markets, especially in technology stocks.
• Geopolitical tensions, including the ongoing situation in the Strait of Hormuz and potential AI profitability taxes in South Korea, are contributing to market uncertainty and impacting energy and tech sectors.

The April CPI data revealed higher-than-expected inflation, particularly in core and services, reaching highs not seen since May 2023. This has led to a bearish market reaction with stocks lower and yields higher, further complicated by geopolitical risks in the Middle East and potential tech taxation in South Korea.