Trading day: Inflation? Stocks don't care

• U.S. producer prices surged in April with the biggest gains since 2022, far exceeding expectations. The gap between PPI and CPI inflation widened to 2.2 percentage points, the largest since 2022, suggesting consumer inflation may soon breach 4%.
• Markets gained across the board: Nasdaq +1.2%, S&P 500 +0.6%, Asian markets also rose with KOSPI +3%. A weak 30-year Treasury auction showed high yields paid and very low bid-to-cover ratios.
• Kevin Warsh was confirmed as Federal Reserve chair, replacing Jerome Powell. He faces the challenge of convincing colleagues to cut rates amid the highest and fastest-rising inflation in years.

Summary

Market Performance:

U.S. equities rallied on May 13, 2026, despite rising inflation concerns, with the S&P 500 gaining 0.6% and Nasdaq up 1.2% to reach record highs. Asian markets also posted solid gains, with South Korea's KOSPI rising 3% and Japanese stocks up 1%. European markets added 0.5%.

Inflation Surge:

U.S. producer price inflation (PPI) surged in April, posting the largest monthly and annual gains since 2022 and significantly exceeding analyst expectations. The gap between PPI and CPI inflation rates widened to 2.2 percentage points—the largest since 2022—signaling consumer inflation could soon breach 4%. Despite the inflation spike and rising bond yields, investors remained focused on geopolitical developments.

U.S.-China Summit:

Markets await the Beijing summit between Presidents Trump and Xi Jinping, with discussions expected on Iran, Taiwan, trade, energy, and tech security. Trump's delegation includes business leaders Elon Musk, Apple CEO Tim Cook, and Nvidia CEO, potentially signaling negotiations around Nvidia's H200 AI chip sales to China. Trump's negotiating position is reportedly weaker than October's meeting due to the Iran war and resulting inflation.

Federal Reserve Leadership:

Kevin Warsh was confirmed as Federal Reserve Chair, replacing Jerome Powell whose term ends Friday. Warsh faces the challenge of advocating for rate cuts amid rising inflation across multiple measures.

Other Market Moves:

• Bond yields ended largely unchanged despite weak 30-year Treasury auction
• Oil declined with Brent down 1.7%
• Gold fell 0.5%
• Indonesian rupiah dropped 2%, its biggest decline this year
• U.S. debt-to-GDP ratio hit 100% for the first time in 80 years