Inflation comes in (PPI)ping Hot, Stocks Don’t Care

The S&P 500 rose 0.6% to a record 7,444.04 and the Nasdaq surged 1.2% to 26,402.34, both record closes, while the Dow slipped 0.1% to 49,693.20. The rally was extraordinarily narrow — Jones Trading noted that Google, Nvidia, Apple and Tesla accounted for 100% of the S&P 500’s gain, with the JT20 megacap index up 1.5% while breadth was negative. Six of the Magnificent Seven gained 1.4%–3.9%. PPI was a shocker: headline +1.4% monthly (largest since March 2022), +6.0% annually (largest since December 2022), far above estimates of +0.5% and +4.9%. Energy prices surged 7.8% with gasoline +15.6%. However, analysts noted the PCE-relevant PPI components were surprisingly benign. Kevin Warsh was confirmed as Fed chair 54–45 — the slimmest margin ever — replacing Powell whose term ends Friday. Boston Fed’s Collins said rate hikes could be needed if inflation persists. Trump landed in Beijing with Jensen Huang, Elon Musk and Tim Cook for the two-day summit with Xi. Brent fell 1.8% to $105.87. The 10-year yield was little changed at 4.467% after testing 4.5%. A 30-year auction was weak. Morgan Stanley raised its S&P 500 target to 8,000. Ford surged 13.2%. Alibaba jumped 8% on cloud/AI growth. OpenAI floated a global AI governance body modelled on the IAEA.