S&P 500 holds near record highs as tech boost offsets hot inflation data

NEW YORK: The S&P 500 hovered near its record highs on Wednesday as chip stocks and megacap tech shares rose, even though hot producer prices data reinforced bets that the Federal Reserve would keep monetary policy restrictive.

Alphabet and Tesla climbed 2.6 percent and 3.6 percent, respectively. The Philadelphia SE Semiconductor index was last up 2.3 percent and testing a new record high, bouncing back from a selloff in the previous session.

US producer prices increased more than expected in April, posting their biggest gain since early 2022, the latest indication that inflation was accelerating amid the war with Iran.

The data comes a day after US consumer inflation posted the sharpest increase in three years in April and knocked the S&P 500 and the Nasdaq from their record highs.

“Frankly, inflation pressures were already percolating before the Iran conflict, and while much of the damage can be undone if we get a quick resolution, today’s PPI print is a reminder of the level and intensity of the coming price pressures at the consumer level,” said Steve Wyett, chief investment strategist at BOK Financial.

Traders now expect the Fed to stay on hold all through the year and a 34.3 percent chance of a rate hike by December, compared with an around 15 percent chance seen a week ago, according to the CME FedWatch Tool.

Markets are expecting a potentially more hawkish central bank under Kevin Warsh, whom the Senate confirmed to the board on Tuesday and could move to approve as chair as soon as Wednesday. Jerome Powell’s term ends on Friday.

Meanwhile, President Donald Trump landed in Beijing accompanied by an entourage that included Nvidia’s Jensen Huang and Elon Musk, after pledging to urge China’s Xi Jinping to “open up” to US business at the start of their two-day summit.

Trump had said ahead of the high-stakes summit that he did not expect to ask Xi to help resolve the conflict with Tehran.

Wall Street has been wary that a prolonged conflict could keep energy prices elevated, adding to inflationary pressures and complicating the US Federal Reserve’s policy decisions.