Nasdaq and S&P set for new records as Trump talks up US-China relations

• Producer price inflation rose 1.4% month-on-month, well above forecasts, prompting investors to scale back expectations for Federal Reserve rate cuts while Kevin Warsh prepares to formally replace Jerome Powell as Fed chair
• The Nasdaq Composite jumped 1.2% to a new peak of 26,402 while the S&P 500 rose 0.6% to 7,444, driven by AI infrastructure investments including buzz around Cerebras Systems' blockbuster IPO priced at $185 per share
• Trump's China trip with major tech CEOs provided 'market-friendly optics' as analysts noted the AI trade 'remains the main offset to broader macro caution' amid higher rates and inflation pressures

Market Summary: US Equities Eye New Highs Amid AI Optimism and China Diplomacy

Market Performance:

US futures pointed to strong gains Thursday morning, with Dow Jones futures up 377 points (0.8%), while S&P 500 and Nasdaq futures rose 0.3%. Wednesday's session saw the Nasdaq Composite surge 1.2% to a record 26,402, and the S&P 500 gain 0.6% to close at 7,444. The Dow Jones lagged, falling 67 points (0.1%) to 49,693.

Key Economic Data:

Producer price inflation came in hot at 1.4% month-on-month, significantly exceeding forecasts. This prompted investors to reduce expectations for Federal Reserve rate cuts. The 30-year Treasury yield climbed above 5%, reflecting expectations for prolonged higher interest rates. Investors await retail sales data and weekly jobless claims at 8:30am ET.

Leadership Changes:

Kevin Warsh is confirmed to formally replace Jerome Powell as Federal Reserve chair on May 15, 2026.

Geopolitical Developments:

President Trump began his China visit, emphasizing a "fantastic future" for US-China relations, with President Xi Jinping stressing cooperation. A major US business delegation including Nvidia's Jensen Huang and Tesla's Elon Musk accompanied the trip, reinforcing market-friendly sentiment.

Sector Focus:

AI infrastructure remains the dominant market driver. Applied Materials reports earnings after the bell, with analysts closely watching commentary on hyperscaler demand and semiconductor spending. Cerebras Systems generated significant buzz with its AI-related IPO priced at $185, demonstrating strong investor appetite for AI infrastructure plays.

Commodities:

WTI crude traded flat below $101 despite ongoing Strait of Hormuz disruption concerns.

Analysts note the AI trade is "carrying this market on its back" and offsetting broader macroeconomic caution around persistent inflation.