Wholesale inflation came in at 6% this morning. The Street expected 4.9%. Core producer prices rose 1% in a single month — triple the estimate. The 30-year Treasury yield crossed 5% for the first time since May 2025. And the Nasdaq closed at a record high. Up 1.2%. Because Jensen Huang was in Beijing with the president, and right now the market will pay any price for anything that touches AI — even on the day inflation prints its worst number since 2022.

Split tape. The S&P 500 gained 0.6% to close at 7,444 — another record. The Nasdaq rose 1.2% to 26,402 — also a record. The Dow fell 67 points. The Russell 2000 was flat. Two indexes at all-time highs. One in the red. The other barely moving. That tells you everything about where the money went today.

The PPI report hit at 8:30 and it was ugly. Headline producer prices rose 1.4% for the month — nearly triple the 0.5% the Street expected. On a year-over-year basis, wholesale inflation is running at 6%, the highest since January 2023 and well above the 4.9% consensus. Core PPI — which strips out food and energy — rose 1% for the month against a 0.3% estimate. That's not a miss. That's a different planet. The Bureau of Labor Statistics said 60% of the headline gain came from services, not energy. Trade margins rose 2.7%. This isn't just gas prices. The inflation is spreading.

Treasuries sold off. The 10-year hit 4.48%, the highest this year. The 20-year and 30-year both crossed 5% for the first time since May 2025. When the long bond crosses 5%, it tells you the market expects inflation to stick around for years, not months. Kalshi bettors now put a 35% chance on the Fed raising rates before 2027 — more than double where that number sat in late April.

The chips didn't care. Nvidia's Jensen Huang is in Beijing with Trump this week, alongside Tim Cook and Elon Musk. The summit with Xi Jinping has technology and rare earths on the table. The market read "Jensen Huang in China" and bought the whole semiconductor complex. Nvidia is expected to report earnings next Wednesday, and analysts at Bank of America reiterated their buy with a $320 target. The tape treated Nvidia's proximity to the trade talks as a preview of next week's print.

The losers told you where the inflation hit. Salesforce fell 2.8% — the Dow's worst name. Home Depot dropped 2.5%. When wholesale prices rise 6% and the cost of borrowing crosses 5%, the companies that sell to businesses and consumers on credit get squeezed. J&J gained 2.7% and 3M added 2.6% — the defensive names that win when the growth trade narrows.

Stocks don't price today. They price the next six to twelve months. And what the market priced today is a complete divorce between two economies — the AI economy and everything else.

Here's the chain. Tuesday's CPI came in at 3.8%, a three-year high. Today's PPI came in at 6%, a three-year high. Core PPI — the one that measures everything except food and energy — came in at 5.2% year over year, against a 4.3% estimate. That's the number that matters most. When core producer prices run that hot, it means the inflation isn't just in the gas pump. It's in services. It's in trade margins. It's in the cost of doing business across the whole economy. And when that cost gets passed through to consumers — which is what PPI predicts — consumer inflation in the second half of this year is going higher, not lower.

The bond market heard the number and priced it. The 30-year yield crossed 5%. The 10-year hit its highest level of 2026. The rate-cut story that powered the market two weeks ago is gone. In its place is a growing bet that the Fed will have to raise rates — a 35% probability on Kalshi, up from 15% a month ago.

Schwab's research team flagged the comparison today: the only other time the S&P 500 sat at record highs with less than 60% of its members above their own 50-day and 200-day moving averages was December 1998 to March 2000. Anyone over 40 knows what happened in March 2000. The Nasdaq peaked. The dot-com bubble burst. The index fell 78% over the next two and a half years. I'm not calling a crash. Valuations now are roughly a quarter of what they were then — the AI leaders trade at about 39 times earnings versus 152 times for the dot-com darlings. But the pattern — record highs, narrow breadth, inflation ignored, one sector carrying the index — is the same. And the same pattern has only happened once before in the last thirty years.

The forward-looking read: Nvidia reports next Wednesday May 20. That's the print that decides whether the AI trade holds or breaks. If Nvidia posts data center revenue above $70 billion and guides higher, the market has its proof that AI earnings justify the concentration. If it disappoints — or if margins compress — the one trade holding the index up gets tested against 6% wholesale inflation and 5% on the long bond.

Three things I'm watching:

Consumer spending is the next test. After back-to-back hot inflation reports — CPI at 3.8%, PPI at 6% — the question is whether the consumer is still buying or starting to pull back. March retail sales were solid. If April comes in below expectations, the market has to reckon with both higher prices and slowing demand at the same time. That combination — rising costs and falling sales — has a name that Tom's readers will learn next week if it shows up.

One week out. The most-watched print on the calendar just became more important. With 6% PPI and 5% on the 30-year, the only thing holding the index at records is the AI trade. Analysts expect revenue between $70 billion and $78 billion, roughly 60% year-over-year growth. Earnings are expected to nearly double. If Nvidia delivers, the trade survives another quarter. If it doesn't, the narrow rally runs out of names to lean on.

Jensen Huang, Tim Cook, and Elon Musk are in Beijing. Technology and rare earths are on the table. Any deal on chip export restrictions or semiconductor supply chains moves the whole sector. Any friction — new restrictions on AI chip sales, rare earth export controls — hits the one group of stocks carrying the index. The next 48 hours of headlines from Beijing set the tone for the rest of the week.

CPI at 3.8%. PPI at 6%. The 30-year at 5%. And the Nasdaq at a record. The market is ignoring every inflation signal to bet on AI. Nvidia in seven days decides whether that bet holds.

That's it for today. See you tomorrow after the close.