(May 14): A rally in technology giants drove stocks to all-time highs, overshadowing data showing a resurgence in inflation that fueled wagers the Federal Reserve (Fed) will keep rates higher for longer.
Megacaps led gains in the S&P 500, with the chiefs from Nvidia Corp, Tesla Inc and Apple Inc joining President Donald Trump’s business delegation to China. A drop in oil also helped sentiment. A US$25 billion sale of 30-year bonds saw investors snagging 5% yields on those maturities for the first time since 2007. In late hours, Cisco Systems Inc gave a solid outlook.
The six-week surge in equities to a series of records is defying concerns about the economic fallout of the war in Iran. Stocks can rally further as a recovery in earnings and still-low positioning outweigh the threat from higher bond yields, said Max Kettner at HSBC Holdings plc.
Morgan Stanley strategists are turning more positive on US equities in a bet that profits and a strong economy will keep the bull market running. The team led by Mike Wilson expects the S&P 500 to reach 8,300 in the next 12 months. The gauge is currently trading near 7,444.
“Resiliency in earnings data despite geopolitical risk, private credit concerns and AI disruption is supportive of our view,” he said.
Meantime, back-to-back inflation reports this week showed mounting price pressures, pushing traders to boost wagers on a Fed hike in the coming year.
See also: Trump’s more than 3,700 trades astonish Wall Street insiders
The producer price index (PPI) rose 6% in April from a year ago, topping all estimates in a Bloomberg survey of economists. The monthly gain was also the sharpest since 2022. The core gauge climbed 5.2% from April 2025 — the most in more than three years.
“Wednesday’s PPI was strikingly elevated as producers are feeling the ripple effects of US$100 per barrel oil,” said Clark Bellin at Bellwether Wealth. “The Federal Reserve has an inflation problem on its hands.”
Several components of the PPI are of particular interest as they feed into the Fed’s preferred inflation gauge — the personal consumption expenditures price index. The flip side is that increases in components feeding into the PCE deflator were modest by comparison to pressure elsewhere, said Gary Schlossberg at Wells Fargo Investment Institute.
See also: Traders dump chipmakers as rising yields drive US stock sell-off
“One takeaway is that companies are not passing through costs to consumers across the board just yet,” noted Chris Low at FHN Financial. “But company input costs are sharply higher, which obviously increases pressure to pass through costs in future.”
Uploaded by Isabelle Francis
