Thursday, May 14

April CPI surged to 3.8% year-over-year, more than double the Fed's 2% target and crushing consensus for cooling after three 25bp cuts in late 2025, driving a reassessment of Fed easing bets amid Iran conflict-fueled energy spikes. The S&P 500, Dow, and Nasdaq posted early gains despite the print, with consumer stocks leading on hopes tariff relief aids Asia supply chains, while tech held firm on AI productivity outpacing wages—broadening participation beyond megacaps as materials, healthcare, and industrials reclaimed uptrends. This resilience surprised desks expecting risk-off, underscoring equity digestion of sticky inflation when labor adds just 50,000 jobs without layoff surges.

The 10-year Treasury yield climbed to 4.4%, its highest since July 2025 and up from 3.95% pre-Iran tensions, as breakevens rose on Strait of Hormuz fears sustaining oil above $120 per barrel after Brent's four-year peak at $126 last week. Gold and energy rallied on haven flows, USD strengthened versus majors amid policy uncertainty from Liberation Day tariffs and USMCA talks, while credit underperformed Treasuries—traders pricing one final Fed cut to 3.25-3.50% before pause, against prior aggressive easing wagers. Non-tech earnings forecasts fell, highlighting oil's threat to debt-funded AI capex if yields stay elevated.

Markets shrugged off geopolitics' resurgent inflation narrative, with bull thesis intact on 1.8% GDP forecasts and OBBBA stimulus, though prolonged Hormuz closure risks higher energy, defense outperformance, and cyclical weakness. Friday's Supreme Court ruling on IEEPA tariffs matters because it could validate or unwind 50% metal duties, reshaping trade flows and inflation passthrough at a pivot for 2026 growth stability.