Bonds Fall as Inflation Pickup Fuels Fed-Hike Bets: Markets Wrap

(Bloomberg) — A resurgence in inflation sent bonds lower on speculation the Federal Reserve will keep interest rates higher for longer as a war-driven surge in energy costs threatens to ripple through other parts of the economy.

Traders ramped up their hawkish bets after data showed US wholesale prices accelerated in April to the fastest pace since 2022, with the conflict in the Middle East driving up freight transportation costs. Treasury 10-year yields rose toward the highest since June. US oil hovered near $102. A bounce in megacaps lifted stocks, with Nvidia Corp. and Tesla Inc. pacing gains.

The producer price index rose 6% from a year ago, topping all estimates in a Bloomberg survey of economists. The monthly gain was also the sharpest since 2022. A core measure that excludes food and energy increased 5.2% from April 2025 — the biggest advance in more than three years.

“Wednesday’s PPI was strikingly elevated as producers are feeling the ripple effects of $100 per barrel oil, which is raising the cost of production across the board, as energy is arguably the most critical input cost,” said Clark Bellin at Bellwether Wealth. “The Federal Reserve has an inflation problem on its hands.”

Wall Street has renewed bearish wagers on Treasuries, boosting bets the Fed will hike by the middle of next year. Money markets briefly priced in as much as 24 basis points of a quarter-point increase by June 2027, compared to 21 basis points at Tuesday’s close.

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.

“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.”

While rising Treasury yields don’t currently pose a threat to stocks, more than one Fed rate increase would be “a bit tough to swallow,” Max Kettner at HSBC Holdings Plc said on Bloomberg Television.

Meantime, President Donald Trump arrived in Beijing for the first state visit by a US leader in nine years. The US and China are weighing a potential framework whereby each country identifies some $30 billion in goods on which tariffs could be eased without threatening national security interests, Reuters reported.

As part of that agenda, Trump brought along a business delegation featuring top US executives from Tesla’s Elon Musk and Apple Inc.’s Tim Cook to Boeing Co.’s Kelly Ortberg. In an unexpected twist, Nvidia’s Jensen Huang boarded the presidential plane as a last-minute addition, thrusting artificial intelligence and technology into the spotlight.

Corporate Highlights:

Microsoft Corp.’s LinkedIn is cutting workers in the tech industry’s latest move to reduce headcount in the artificial-intelligence age. Cloud computing provider Nebius Group NV reported a 684% jump in first-quarter sales on increased demand for its data centers. Anthropic PBC is in early talks with investors to raise at least $30 billion in fresh financing, according to people familiar with the matter, setting the stage for what could be its largest funding round yet. Alibaba Group Holding Ltd. and Tencent Holdings Ltd. reported revenue that fell short of estimates, disappointing investors who hoped their growing spending on AI would turbocharge growth. Skechers USA Inc. increased its offer to resolve a lawsuit brought by hedge funds and other investors challenging 3G Capital’s $9.4 billion purchase of the footwear maker after settlement talks failed last year, according to people familiar with the situation. What Bloomberg strategists say…

“If rates rise further as traders expect, the burden of higher borrowing costs is likely to be the biggest for assets that have seen the most spectacular rallies.”

—Kristine Aquino, Macro Strategist, Markets Live. For the full analysis, click here.

Some of the main moves in markets:

Stocks

The S&P 500 rose 0.3% as of 11:42 a.m. New York time The Nasdaq 100 rose 0.6% The Dow Jones Industrial Average fell 0.4% The Stoxx Europe 600 rose 0.8% The MSCI World Index rose 0.4% Currencies

The Bloomberg Dollar Spot Index was little changed The euro fell 0.2% to $1.1715 The British pound fell 0.1% to $1.3526 The Japanese yen fell 0.1% to 157.79 per dollar Cryptocurrencies

Bitcoin fell 1.8% to $79,260.76 Ether fell 1.4% to $2,252.25 Bonds

The yield on 10-year Treasuries advanced two basis points to 4.48% Germany’s 10-year yield was little changed at 3.10% Britain’s 10-year yield declined four basis points to 5.06% Commodities

West Texas Intermediate crude was little changed Spot gold fell 0.3% to $4,699.78 an ounce ©2026 Bloomberg L.P.