Consumer Prices Accelerated At Their Fastest Pace In Nearly 13 Years In May

Plus, GameStop announced a new CEO and CFO, Moderna asked the FDA to expand the approved use of its COVID-19 vaccine to 12 to 17 year olds, and Restoration Hardware delivered an earnings beat.

Stocks were higher at the open on Thursday with the Dow adding 55 points, or nearly 0.2%. The S&P 500 rose by 0.2%, while the Nasdaq traded just under 0.2% higher.

Consumer prices accelerated at their fastest pace in almost 13 years in May as inflation pressures continued to ramp up. The Labor Department said the consumer price index—which represents a basket including food, energy, groceries, housing costs, and sales across a spectrum of goods—rose 5% year-over-year, while economists had expected a gain of 4.7%. May’s reading marks the highest gain in the CPI since August 2008. “The strength in the top line indices was driven largely by categories that have been heavily disrupted by COVID and remain under pressure from supply chain disruptions,” wrote Eric Wingorad, senior economist at Alliance Bernstein. “The more persistent categories of inflation — the ones that do a better job of capturing the sustainable trend—are significantly more subdued. That means that the details of today’s print continue to support the idea that the spike in inflation is transitory, even if it is more intense than most forecasters (myself included) would originally have anticipated.”

GameStop shares are down 12% this morning amid news of a stock sale, an SEC probe, and the introduction of a new CEO and CFO. The retailer said yesterday afternoon that it has appointed former Amazon executives Matt Furlong as its new CEO and Mike Recupero as CFO. Just as the new top executives were unveiled, GameStop said U.S. securities regulators are looking into the trading of its shares. “We are in the process of reviewing the request and producing the requested documents and intend to cooperate fully with the SEC staff regarding this matter,” the company said in a quarterly filing. “This inquiry is not expected to adversely impact us.” As for the stock sale, GameStop said it will involve as many as 5 million shares through an at-the-market program. The prospect of dilution isn’t sitting well with current investors.

Microsoft said its Xbox gaming unit is working on new hardware and deals with TV makers that will let people play games without needing to buy a gaming console. The Netflix-like cloud gaming service is a bet that the future of video games will be a subscription-based model where people pay per month to get access to a multitude of games. “Cloud gaming is truly a breakthrough experience,” CEO Satya Nadella said in a video release. “It’s a really fast, easy way to get into gaming.”

Moderna asked the FDA to expand the emergency use of its COVID-19 vaccine in adolescents aged 12 to 17. The company said last month that its vaccine proved to be 100% effective in a study of 12 to 17 year olds, making it the second shot to demonstrate high efficacy in younger age groups. If the FDA approves the expansion, it would dramatically increase the number of shots available to middle and high school students ahead of the next school year. In other COVID-19 vaccine news, the CDC said this morning that the number of cases of a heart inflammation condition in 16 to 24 year olds was higher than expected after receiving a second dose of either the Pfizer or Moderna shot. “We still don’t know whether this is truly related to the vaccine,” said Dr. Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research, adding that the “handful” of cases reported have been “very mild, lasting a day or two.”

And Restoration Hardware shares are up more than 14% today after the high-end furniture retailer reported an earnings beat after the bell on Wednesday. RH posted earnings per share of $4.89 on revenue of $861 million, versus estimates for earnings per share of $4.10 on revenue of $758 million. “While fiscal 2021 will surely be a tale of two halves, there are many data points that lead us to feel optimistic that our strong performance will continue through the second half of 2021 with growth reaccelerating in fiscal 2022 and beyond,” the company said in the earnings release. “These include a strong housing and renovation market, both with pent up demand and a long tail, a record stock market, low interest rates and the reopening of several large parts of our economy. Additionally, the un-masking of the general public could lead to a Roaring Twenties type of consumer exuberance.”

Stocks We’re Watching

Sunworks Inc (NASDAQ: SUNW): Sunworks announced yesterday that it will be added to the Russell Microcap Index at the conclusion of the 2021 Russell indexes annual reconstitution, effective after the market opens on June 28. “Being added to the Russell Microcap® Index is a testament to the hard work of our entire organization and continues the momentum following our business combination with Solcius,” said CEO Gaylon Morris in a press release. “Our expectation is that becoming a part of this widely used index will expose Sunworks to new investors, particularly institutional investors, helping us to diversify our shareholder base and improve liquidity.”

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