Friday: After Retail Sales Surprise, PPI Is Next on Deck

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By John J. Edwards III
Staff Reporter

The fixed-income selloffs that pushed long-bond yields above 7% in April and May were but a fading memory Thursday, as a shocker of a

May retail sales

report sent bond prices soaring. The yield on the 30-year Treasury bond fell to 6.76%, spurring blue-chip stocks to powerful, record-setting gains.

Retail sales, expected to rise 0.4% in total and 0.3% excluding autos, instead dipped 0.1% on both counts for their third consecutive monthly decline. Marketeers took that as a sure sign that the

Federal Reserve

will keep interest rates steady at its July 1 policy meeting, but economists cautioned that nothing is certain in this volatile economy.

As we noted in Thursday's

Market Roundup,

Nikko Securities

chief economist Robert Brusca warned that several weekly retail sales reports stand between now and the Fed meeting. "I think that the Fed's going to be raising rates, and they may be raising rates in July," Brusca said.

Frazier Evans, senior economist at

Colonial Investment Services

in Boston, maintained that the retail sales report reduces the chance of a July rate hike to less than 50-50. But he offered a warning of his own, saying an upward revision before the policy confab is likely.

Evans expects Friday's release of the

Producer Price Index

to come in essentially flat, roughly in line with the consensus expectation of a 0.1% uptick in both the total and core measures. But Brusca sees more strength on the production side, bucking the Street with an expectation of 0.3% on both figures.

Friday's numbers

(all times EDT):

Producer Price Index

(8:30 a.m.): Measuring prices at the wholesale level in May. For the total PPI, the consensus median estimate is an increase of 0.1% versus a decline of 0.6% in April. For the core PPI, excluding the volatile food and energy sectors, the consensus calls for a 0.1% increase versus a 0.1% decline in April.

Business inventories

(8:30 a.m.): For April. The consensus median estimate is a 0.2% increase, compared with 0.3% in March.

Consumer Sentiment Index

(10 a.m.): The

University of Michigan

gauge for early June. The consensus calls for 103.0 versus 103.2 in May.

Fed speech

(10:30 a.m.):

Chicago Fed

President Michael Moskow addresses the

Iowa Conference on the Midwest Economy

.

Treasury auctions

(2:30 p.m.): Announcement of a 52-week bill auction; an unchanged $13.75 billion is expected.