Stocks Hit New Highs as AI Trade Offsets Inflation: Markets Wrap
(Bloomberg) — A rally in technology giants drove stocks to all-time highs, overshadowing data showing a resurgence in inflation that has fueled wagers the Federal Reserve 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 gauge of chipmakers climbed 3%. A drop in oil also helped sentiment. Treasuries lost steam as US wholesale prices accelerated to the fastest pace since 2022. A $25 billion sale of 30-year bonds saw investors snagging 5% yields on those maturities for the first time since 2007.
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 powerful recovery in earnings and still-low positioning levels outweigh the threat from rising bond yields, said Max Kettner at HSBC Holdings Plc.
Morgan Stanley strategists are turning more positive on US equities in a bet that blockbuster earnings 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 7,450.
“Resiliency in earnings data despite geopolitical risk, private credit concerns and AI disruption is supportive of our view,” he said.
Read: Senate Confirms Warsh to Lead Fed as Trump Tests Its Autonomy
Meantime, Wall Street has renewed bearish wagers on Treasuries after the latest inflation report, 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.
The producer price index rose 6% from a year ago, topping all estimates in a Bloomberg survey of economists. The monthly advance was also the sharpest since 2022. A core measure increased 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 $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.
“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.”
Corporate Highlights:
Microsoft Corp.’s LinkedIn is cutting workers in the tech industry’s latest move to reduce headcount in the artificial-intelligence age. 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, signaling the challenges in translating higher spending on AI into faster growth. Ford Motor Co. jumped after Morgan Stanley issued a bullish call that the automaker’s energy storage business could soon make a deal with hyperscalers. Transformative events like the Iran conflict and the rise of artificial intelligence are creating increased demand for Honeywell International Inc.’s products ahead of its split later this month, according to the company’s chief executive officer. 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 0.7% as of 2:55 p.m. New York time The Nasdaq 100 rose 1.1% The Dow Jones Industrial Average fell 0.2% The MSCI World Index rose 0.6% Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.3% to $1.1707 The British pound fell 0.2% to $1.3516 The Japanese yen fell 0.2% to 157.90 per dollar Cryptocurrencies
Bitcoin fell 1.4% to $79,574.74 Ether fell 1.1% to $2,259.35 Bonds
The yield on 10-year Treasuries advanced one basis point 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% The yield on 2-year Treasuries was little changed at 3.99% The yield on 30-year Treasuries advanced two basis points to 5.04% Commodities
West Texas Intermediate crude fell 1.2% to $101 a barrel Spot gold fell 0.7% to $4,682.88 an ounce ©2026 Bloomberg L.P.
