The S&P 500 and Nasdaq Composite set new all-time highs on Wednesday as a powerful rally in artificial intelligence chip stocks overshadowed a hotter-than-expected inflation report and rising expectations that the Federal Reserve will keep interest rates elevated for longer.
The broad-market S&P 500 gained 0.58% to close at 7,444.25, while the tech-heavy Nasdaq Composite surged 1.2% to 26,402.34. Both indexes hit fresh intraday and closing records. In contrast, the Dow Jones Industrial Average fell 67.36 points, or 0.14%, to 49,693.20.
Technology and semiconductor stocks led the gains, with Nvidia advancing over 2% and Micron Technology climbing more than 4%. The VanEck Semiconductor ETF rose about 2%. Investor enthusiasm was further fueled after Nvidia CEO Jensen Huang joined President Donald Trump’s delegation to China, raising hopes for improved AI chip sales in the critical Chinese market.
However, the rally was narrow. Roughly two-thirds of S&P 500 components declined, according to FactSet data, with cyclical shares like Home Depot and JPMorgan Chase underperforming amid inflation worries and rising energy costs linked to the Iran conflict.
Inflation data stokes concerns
The Labor Department reported that the Producer Price Index surged 1.4% in April, marking the biggest monthly jump since March 2022 and far exceeding economists’ forecast of a 0.5% rise. On a year-over-year basis, wholesale inflation hit 6.0%, the steepest since December 2022. Much of the increase was driven by energy prices, though underlying inflation measures also remained firm, with the core PPI excluding foods, energy and trade services rising 0.6% for the month and 4.4% from a year ago.
The hot PPI print followed a similarly strong consumer inflation report earlier in the week, further eroding hopes for near-term rate cuts. Boston Fed President Susan Collins even said that an interest rate increase could still be on the table if price pressures don’t ease.
Trump meets Xi in Beijing
President Trump arrived in Beijing on Wednesday evening for the first state visit by a U.S. president in nine years, aiming to stabilize ties amid trade tensions and the Iran conflict. He was greeted by Vice President Han Zheng with a red-carpet ceremony. The two-day summit with President Xi Jinping is set to address trade barriers, tariffs, artificial intelligence, and Taiwan. Trump traveled with a business delegation including CEOs from Tesla, Apple, Boeing, and Nvidia. Reports suggest both sides may explore easing tariffs on $30 billion worth of goods.
New Fed chair and corporate layoffs
The Senate confirmed Kevin Warsh as the next Federal Reserve chair in a 54-45 vote, replacing Jerome Powell. Warsh, a former Fed governor, has criticized the central bank’s quantitative easing and previously called for a “regime change.” His first policy meeting will be held on June 16-17, with markets watching for signals on monetary policy direction.
Meanwhile, Walmart and LinkedIn announced fresh workforce restructurings. Walmart plans to cut or relocate around 1,000 corporate jobs as it consolidates AI operations, while LinkedIn is cutting about 5% of its staff. So far in 2026, more than 103,000 tech workers have lost their jobs globally, according to Layoffs.fyi.
Despite the mixed signals from the broader economy, momentum in equities remains strong. Morgan Stanley raised its year-end S&P 500 target to 8,000 from 7,800, citing robust corporate earnings.
