US equities mixed as hot PPI data and Trump-China summit dominate trading
Dow Jones falls while S&P 500 and Nasdaq rise; Treasury yields climb near 4.5% as investors weigh inflation data against geopolitical developments in Beijing and the Middle East.
US equities traded mixed on Wednesday as investors balanced hotter-than-anticipated April producer price index (PPI) data against diplomatic developments from President Trump’s trade summit in Beijing with Chinese leader Xi Jinping. The Dow Jones Industrial Average fell between 0.4% and 0.5%, while the S&P 500 rose 0.4% before settling near flat, and the Nasdaq Composite gained between 0.2% and 1%. April headline wholesale inflation rose 6% year-on-year, significantly exceeding the 4.8% forecast, which reinforced market expectations that the Federal Reserve will maintain current interest rates.
Consequently, Treasury yields increased, with the 10-year yield approaching 4.5%. The broader bond market reflected heightened inflation expectations, with the 30-year yield remaining above the 5% psychological level and the 5-year yield holding at 4.13%. Bond yields have moved up between 2% and 4% over the past five days as markets began to price in higher inflation expectations, following a similarly hot consumer price index report released on Tuesday.
Geopolitical tensions, including the war in Iran and the Strait of Hormuz blockade, continued to bolster energy and commodity prices, driving silver and copper to record highs. The Bloomberg Commodities ex-Energy index notched an all-time high, supported by a China-fuelled supercycle and demand from the build-out of AI and electric vehicles. Silver and copper futures have surged 67% and 30% respectively over the past six months, while the closure of the Strait of Hormuz has choked off major global supplies of fertilizers, putting upward pressure on agricultural commodities.
Corporate earnings were varied, with Cisco and Alibaba exceeding estimates, while Birkenstock missed. Apple shares rose following the participation of CEO Tim Cook in Trump’s delegation in China. The visit, which also included executives from Nvidia, Tesla, BlackRock, and Boeing, underscores the ongoing push to stabilize US-China commerce relations amid an AI race and a complex geopolitical backdrop. Apple stock is up more than 10% year-to-date, approaching a record close as it focuses on "Apple Intelligence" through partnerships rather than building infrastructure from scratch.
Morgan Stanley raised its year-end target for the S&P 500 to 8,000 from 7,800, citing an unexpectedly strong earnings season that has powered the benchmark to record highs. First quarter profits for companies in the S&P 500 have grown 27% throughout the season, far above the 12% analysts had expected. The bank’s analysts noted that their bullish view is an earnings story, driven by a strong environment as positive operating leverage persists and is further enhanced by AI adoption.
