Technology Leads Rally, Wall Street Ignores Manufacturer Inflation Signals
A rally in the world's largest technology companies boosted US stocks on Wednesday (May 13), overshadowing data showing a resurgence in inflation that pressured bonds as markets reassessed expectations that the Fed would keep interest rates high for longer. Sentiment was also helped by weakening oil prices, while pressure in the bond market emerged when the 10-year Treasury yield rose to its highest level since July.
The S&P 500 rose 0.5% as of 12:53 p.m. New York time, heading for a new record high. The Nasdaq 100 gained 0.9%, while the Dow Jones Industrial Average fell 0.4%. Chip stocks also rallied, with the chipmaker index rising 2.5%, after the heads of Nvidia, Tesla, and Apple joined President Donald Trump's business delegation to China.
However, the wholesale inflation data added another reason for the bond market to remain defensive. The Producer Price Index (PPI) rose 6% year-on-year, beating all estimates in a Bloomberg survey of economists, for the sharpest monthly increase since 2022. The core measure rose 5.2% from April 2025, the largest increase in more than three years.
Interest rate repricing also strengthened. Following the latest inflation report, Wall Street re-increased its bearish position on Treasuries and increased bets that the Fed could raise rates by the middle of next year. Money markets even priced in a quarter-point hike by June 2027, up from 21 basis points at Tuesday's close.
This dynamic underscores the market's key trade-offs: earnings and tech sector leadership support equities, while producer inflation and rising yields constrain valuations. HSBC believes stocks still have the potential to continue their rally as recovering profits and relatively low investor positioning offset the threat of rising yields.
The market's next focus will be the outcome of the US-China meeting, the direction of long-term yields, and whether PPI pressures continue to affect consumer inflation and Fed policy expectations. (arl)
Source: Newsmaker.id
