The Fed's favorite inflation gauge hit its highest level in three years this morning. PCE rose 0.4% in April. That's the kind of number that makes the Fed reach for the rate-hike button. And the S&P 500 rose to a record. The Nasdaq gained 0.9%. The reason: the 60-day Iran memorandum to extend the ceasefire and restore energy exports from the Persian Gulf came through during the session. The market looked at today's inflation and said: that's the past. It looked at the Iran deal and said: that's the future. Then it bought Snowflake up 36%, sold Nvidia down 1%, and told you the AI trade just rotated from hardware to software.
The Close
Records again — the fifth in six sessions. The S&P 500 gained 0.6% to close at 7,564. The Nasdaq rose 0.9% to 26,917. Both new records. The Dow was flat at 50,669 — up 24 points. The Dow has been the odd one out three times this week: down Tuesday, barely up Wednesday, flat today. The action is in the Nasdaq, and the Nasdaq's action is in software.
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| PCE (April) | +0.4% m/m | 3-year high | ||
| Snowflake (SNOW) | best day ever | +36.5% | ||
| S&P 500 | 7,564 | +0.6% record | ||
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| Information Technology |
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+1.5% | ||
| Communication Services |
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+1.0% | ||
| Consumer Discretionary |
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+0.7% | ||
| Health Care |
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+0.5% | ||
| Real Estate |
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+0.3% | ||
| Materials |
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+0.2% | ||
| Consumer Staples |
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+0.1% | ||
| Utilities |
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−0.2% | ||
| Financials |
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−0.4% | ||
| Industrials |
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−0.5% | ||
| Energy |
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−0.7% | ||
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Snowflake had its best day in history. Up 36.5%. The cloud data company beat on the top and bottom lines, issued Q2 guidance that blew past the Street, and signed a $6 billion deal with Amazon Web Services over five years. The iShares Expanded Tech-Software ETF gained 2.7%. Microsoft rose 3%. Oracle rose 4%. Palantir rose 3%. The software names that use AI infrastructure — not the ones that build it — led the tape.
And the ones that build it? Nvidia fell 1%. Chip stocks pulled back. Uber's COO warned this week about the rising cost of AI spending. Synopsys fell 5% despite beating on earnings after flagging restructuring costs. The money is still in AI — it's just moving from the shovel makers to the people using the shovels.
PCE inflation came in at 0.4% for April — the hottest monthly reading in three years. Jobless claims were solid. Consumer spending was strong. On any other day, that combination sends yields higher and stocks lower. Today the market barely flinched because the Iran news was louder. Reports that Washington and Tehran agreed to a 60-day memorandum to extend the ceasefire — including a plan to gradually restore energy exports from the Gulf — arrived midday. Oil, which had opened up 2.2% on overnight U.S. strikes in Iran, pared its gains on the deal news.
Norfolk Southern fell 5.2% and Union Pacific dropped 4.6% after investors pushed back on their proposed $85 billion merger. Salesforce fell 2% after earnings. Visa and BlackRock both lost about 2%. Dell gained 6% into its earnings report tonight after the close — the market is expecting another AI server blowout.
What The Market Is Pricing In
Stocks don't price today. They price the next six to twelve months. And what the market priced today is the clearest example of that principle I've seen all month.
Here's the chain. PCE inflation — the one number the Fed cares about most — hit a three-year high this morning. That's today. It's real. It's in the data. In any normal week, that print sends yields up and stocks down. But the market didn't sell. It bought. The S&P hit a record. Why? Because the market isn't pricing April's inflation. It's pricing October's inflation. And October's inflation depends on what oil does between now and then.
Oil is down from $110 three weeks ago to $88 yesterday. The Iran memorandum confirmed today says the ceasefire extends 60 days and energy exports gradually restore. If the Strait reopens and oil falls to $80, the CPI readings in July, August, and September start coming down on their own — no Fed hike needed. Gas prices drop. Transport costs drop. Input costs drop. And the 3.8% CPI that has been driving the rate-hike talk starts heading back toward 3%. The market saw today's hot PCE and said: I know. But I also know it's about to get fixed.
The market ignored a three-year-high PCE print because it's pricing a world where the Strait reopens, oil falls to $80, and inflation solves itself by autumn. That's a big bet. It only works if the Iran deal holds, the memorandum becomes a signed agreement, and the oil supply actually returns. If any of those assumptions break, today's hot PCE is still the data — and the Fed has to respond to the data, not to the hope.
The other signal today was the rotation inside AI. Snowflake gained 36%. Microsoft rose 3%. Palantir rose 3%. Oracle rose 4%. And Nvidia fell 1%. That's the market telling you it believes AI is real but the easy money in chips is made. The next phase isn't buying the companies that sell the GPUs — it's buying the companies that turn those GPUs into revenue. The infrastructure buildout funded the software layer, and now the software layer is getting priced. I saw the same handoff in March 2003 when the market stopped buying the fiber-optic cable companies and started buying the firms that used the fiber — companies like Salesforce, Google, and Amazon before most people had heard of them. The infrastructure builds the road. The software drives on it.
What's Next
Three things I'm watching:
01 — Dell earnings tonight after the close
Dell reports in about an hour. The stock gained 6% today in anticipation — and 16% last Friday on analyst upgrades. The Street expects revenue around $35.2 billion with AI server revenue near $13 billion. The question isn't whether Dell beats — Q4 was a blowout. The question is whether the AI backlog, which sat at $43 billion at the end of fiscal 2026, is still growing. If it's above $45 billion and margins hold, the hardware side of the AI trade gets a second wind. If the backlog shrank, today's rotation from chips to software picks up speed.
02 — Iran memorandum becoming a signed deal
The 60-day ceasefire extension memorandum is agreed in principle. But principle isn't signature. Yesterday the White House called Iran's Strait claims a fabrication. Today both sides confirmed the memo. The gap between announced and signed is where hope trades go to die. Watch for a formal signing ceremony or a Trump post confirming the deal. Until it's signed, oil at $88 is priced on promise — and promise has a short shelf life.
03 — The PCE fallout in Fed commentary
PCE at a three-year high is now in the record. Warsh hasn't spoken publicly yet since being sworn in. If any Fed governor comments on the PCE print this week, listen for the word "transitory." If they use it — meaning they think the oil-driven inflation is temporary — the market's bet today is confirmed. If they don't, and instead flag "persistent" or "broad-based," the rate-hike math tightens and the equity risk premium — already at 0.17 — gets tested.
The Fed's inflation gauge hit a three-year high and the market set a record. Snowflake surged 36% and Nvidia fell 1%. The AI trade changed hands. The inflation bet changed too. The market is pricing a fix that hasn't arrived yet. Tomorrow we find out if Dell agrees — and whether Iran signs or stalls.
That's it for today. See you tomorrow after the close.
