Hot inflation lifts rates fears as Dow falls, Nvidia rallies

Hot wholesale inflation put a fresh cloud over the economic outlook as the Dow slipped and a narrow group of AI and semiconductor stocks kept lifting technology. The latest producer price reading showed final demand prices rising 1.4% in April, the biggest monthly jump since March 2022, while the 12-month gain reached 6.0%, the largest since December 2022.

The breadth of the inflation surge made the report harder to dismiss. Nearly 60% of the monthly increase came from services, which climbed 1.2%, the sharpest advance in that category since March 2022, while final demand goods rose 2.0%. Core producer prices, excluding food, energy and trade services, increased 0.6% in April and were up 4.4% from a year earlier. The reading came in well above the 0.5% forecast and reinforced the idea that the Federal Reserve will keep interest rates unchanged at its next meeting.

Markets reacted quickly. Dow futures fell 0.5% after the report, S&P 500 futures were flat and Nasdaq 100 futures rose 0.6%, a split that underscored how inflation is pressuring the broader market while enthusiasm for artificial intelligence still has support in a narrow corner of big technology. The pressure on rates-sensitive shares came as traders digested the prospect of higher-for-longer borrowing costs and still-elevated energy-driven inflation.

That divergence was visible inside the stock market itself. Nvidia rose along with Micron, Sandisk and Intel, helping keep tech resilient even as the Dow weakened. The leadership pattern suggested investors were still willing to pay up for companies tied to AI infrastructure, chips and data-center demand, even as the inflation backdrop argued for caution elsewhere in the market.

The policy and geopolitical backdrop added another layer. President Donald Trump arrived in Beijing for a highly anticipated summit with Chinese President Xi Jinping, a meeting watched closely for signs on trade, tariffs, AI and a possible extension of a trade truce. Nvidia chief executive Jensen Huang joined the trip at the last minute, alongside other business leaders including Tesla’s Elon Musk and Apple’s Tim Cook, adding to the sense that AI remains one of the few market themes powerful enough to cut through a hot inflation report.