S&P 500: 0.13% DOW: -0.17% NASDAQ: -0.38% 10-YR Yield: 4.59%
What Happened?
Major Indexes closed the week roughly where they started. The Dow retook 50,000 mid-week and gave most of it back by Friday. The rally is not over. It is just no longer willing to absorb everything at once.
Inflation came back twice. Tuesday morning CPI rose 0.6% for April, lifting the annual rate to
3.8%, the highest since May 2023, with core CPI at a hotter-than-expected 0.4%. Wednesday morning PPI was the more uncomfortable print: producer prices jumped 1.4% on the month, the biggest monthly gain since March 2022, and 6.0% on the year, the biggest annual gain since December 2022. Services prices rose 1.2%, also the biggest move in over four years, with trade margins up 2.7%, an early signal that tariff costs are starting to flow through wholesaler margins rather than being absorbed.
Treasury yields, which had been falling slightly, reversed: the 10-year backed up roughly 20 basis points on the week over a key level of 4.5%.
After six straight up weeks of equities and an unwound war-risk premium, this is the first time in two months that both the macro data and a high-profile geopolitical event landed below market expectations at the same time.
Trump Visits Beijing: Trade, Oil, Taiwan
President Trump traveled to Beijing this week for the first time in nearly a decade
Departed after two days of talks with Chinese President Xi Jinping
Came with mulitple CEOs
The key takeaway – Trump landed in Beijing Wednesday with a delegation that read like an S&P 500 leadership board. The summit produced an agreement to keep the Strait of Hormuz open, a stated Chinese commitment to buy soybeans and energy, and a 200-aircraft Boeing order Trump announced on Fox News that the Chinese foreign ministry declined to confirm. Tariffs, chips, and the Iran war were left off the public agenda.
The trip itself was the story for two days. Trump arrived in Beijing late Wednesday on Air Force One, accompanied by Tesla's Elon Musk, Apple's Tim Cook, Nvidia's Jensen Huang, BlackRock's Larry Fink, Boeing CEO Kelly Ortberg, Citigroup's Jane Fraser, and roughly a dozen other top U.S. executives.
The welcome at the Great Hall of the People came with a military honor guard, a brass band, and a state banquet. By the close of business Thursday, Trump and Xi had met for two hours and fifteen minutes and agreed in principle to a three-year "strategic stability" framework as the guiding text for the bilateral relationship.
The deliverables were thinner than the imagery. Trump told Fox News that Xi committed to buy "billions of dollars" of soybeans, oil, and liquefied natural gas, and 200 Boeing 737 jets, less than the up-to-500 Jefferies had estimated heading in. The Chinese foreign ministry declined to confirm any aircraft figure, saying only that the two countries had reached "important consensus" on stabilizing the trade relationship.
Tariffs were not discussed; chips, in Trump's own words, "didn't come up"; no extension was negotiated to the existing year-long tariff truce. Iran, the issue that had pushed the original March trip into May, came up but did not move: Trump rejected Iran's latest peace proposal on the return flight and signaled bombing could resume on his timeline. The market's response was the cleanest read of the trip, with equities selling off Friday morning and tech taking the biggest hit.
Inflation Coming Back: CPI and PPI Prints Hot
CPI's print is highest since May 2024
PPI's print is highest since March 2022
The key takeaway – April's inflation prints came in across two days. The first was bad. The second was worse. Headline CPI hit 3.8%, the highest annual rate since May 2023. Producer prices posted their biggest monthly gain in more than four years. By Wednesday afternoon, the bet on a Fed cut later this year had quietly gone to zero, with about 30% odds of a hike before year-end.
Tuesday's Consumer Price Index rose 0.6% on the month and 3.8% on the year. The monthly number matched estimates; the annual rate beat consensus by a tenth and put headline inflation at its highest since May 2023. Gasoline did much of the work, surging 28% over 12 months as the Iran war kept oil above $100 a barrel and pump prices above $4.50 a gallon nationally. Core CPI, which strips out food and energy, rose 0.4% on the month, the hottest monthly core print since January 2025. Shelter, which had been cooperating in prior months, came back at 0.6%. Tariff sensitive categories were ugly across the board: airline fares accelerated 2.8% to a 20.7% 12 month gain, apparel rose 0.6%, and household furnishings rose 0.7%.
Wednesday's Producer Price Index delivered the harder punch. Producer prices rose 1.4% on the month, well above the 0.5% consensus and the biggest monthly print since March 2022. The 12-month rate hit 6.0%, the largest annual gain since December 2022. The services component, which often telegraphs where consumer-price inflation is heading 2 to 3 months out, rose 1.2%, the biggest monthly services jump in over four years; the trade-services line within that rose 2.7%, an early signal that tariff costs are starting to flow through wholesaler and retailer margins rather than being absorbed. By Wednesday's close, fed-funds futures had removed the last remaining 2026 rate cut from the curve, with some traders pricing a non-trivial probability of a hike before year-end.
From Around the Watercooler
AI chipmaker, Cerebras pops in Nasdaq IPO debut.
Retail Sales climbed 0.5% in April, marking the third consecutive monthly increase.
SpaceX accelerates IPO timeline, targets June 12 listing on Nasdaq.
Berkshire Hathaway added a sizeable stake in Delta Air Lines, marking the company's return to the airline industry since exiting in 2020.
Disclousure:
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