Good Afternoon. The April Consumer Price Index registered the strongest annual increase in three years. Headline inflation came in at 3.8% year-over-year, up from 3.3% in March and well above the 2.4% pre-war reading in February. Energy costs jumped 3.8% month-over-month and 17.9% year-over-year, with gasoline up 32.4% and diesel up 54.3% annually. The CME FedWatch tool now shows a 98% probability the Fed stays on hold at June's meeting, and odds of any 2026 rate cut have collapsed to roughly 3% from 18% yesterday.

—Rosie, Wyatt, Evan & Conor

🔥 What’s Hot: 🔥

🥶 What’s Not: 🥶

1. April CPI Hottest Since 2023

The News: The Bureau of Labor Statistics reported that the Consumer Price Index increased 3.8% year-over-year in April, the largest annual gain since May 2023 and up from 3.3% in March. Headline CPI rose 0.6% month-over-month, in line with consensus. Core inflation, which excludes food and energy, climbed 0.4% month-over-month and 2.8% year-over-year -- both hotter than the 0.3% and 2.7% economists expected. Energy prices jumped 3.8% on the month and 17.9% annually, with gasoline up 32.4% year-over-year and diesel up 54.3%. Grocery prices rose 0.5% month-over-month and 3.2% on the year.

Why It Matters: For investors, this is the cleanest "Fed-on-hold" reading of 2026. CME FedWatch odds of a June cut fell to roughly 2%, and the probability of any 2026 cut collapsed from 18% yesterday to 3% today. Goldman Sachs pushed its first-cut forecast to December, and Morningstar now expects no cuts until 2027. The 10-year Treasury yield climbed to 4.43%, the highest since February. For consumers, AAA reports average gasoline above $4.50 a gallon, and shelter inflation reaccelerated to 3.0% year-over-year -- the two biggest line items in a typical household budget are both heating up at the same time.

What to Watch: Wednesday's PPI will color the goods-versus-services pipeline, Friday's preliminary University of Michigan sentiment will measure how households feel, and the May 27-28 FOMC minutes will reveal whether any committee member sees a cut path before 2027.

Source: Yahoo Finance

2. Rate-Cut Odds for 2026 Vanish -- Morningstar Sees First Cut in 2027

The News: The Federal Reserve held the federal funds rate in its 3.50%-3.75% target range at last week's meeting, and following today's CPI, the bond market is pricing the probability of a 2026 cut at roughly 3%, down from 18% on Monday. Morningstar's economics team published a note Tuesday saying the central bank is unlikely to resume cuts until 2027, citing the energy-driven inflation reacceleration and resilient labor market.

Why It Matters: For investors, the rates path is the single biggest input into 2026 equity multiples. A 4.40%+ 10-year Treasury yield with no cuts in sight rebases the S&P 500's 22x forward P/E ratio versus a historical 17x. For consumers, mortgage rates near 7.10% mean the housing market that spent 18 months waiting for relief is going to wait another year. Credit card APRs near 22% and auto-loan rates near 9% stay where they are too.

What to Watch: Jerome Powell's final speech as Fed Chair on May 20 -- his successor takes office June 1 -- and any leadership-transition guidance language on the inflation framework.

Source: Morningstar

3. Chip Stocks Lead Selloff -- Micron, Nvidia, AMD All Lower

The News: Semiconductor stocks led the Nasdaq lower on Tuesday, with Micron giving back roughly 4% of Monday's 6% gain, Nvidia down 1.5%, and AMD and Marvell trimming portions of last week's record rallies. The reversal came as the post-CPI move higher in real Treasury yields pressured the highest-multiple growth complex in the market.

Why It Matters: For investors, this is a textbook reversion-day reading: chips had powered the May rally on AI capex tailwinds, but when the 10-year yield jumps 7 basis points and the discount rate on long-duration cash flows steepens, the most expensive cohort gives back first. For consumers, it does not change the underlying AI infrastructure build-out -- it changes who has to absorb higher financing costs to fund that build-out.

What to Watch: Nvidia's May 20 earnings -- consensus revenue is near $46 billion -- and AMAT's Wednesday post-close release on capex commentary and Asia demand mix.

Source: Yahoo Finance

4. Trump Lands in Beijing Wednesday With 16-CEO Delegation

The News: President Trump departed for Beijing Tuesday evening accompanied by a 16-CEO delegation that includes Tesla's Elon Musk, Apple's Tim Cook, Boeing's Kelly Ortberg, Nvidia's Jensen Huang, Exxon's Darren Woods, Qualcomm's Cristiano Amon, Citigroup's Jane Fraser, Blackstone's Steve Schwarzman, and Visa's Ryan McInerney. The summit with President Xi Jinping is scheduled for Thursday and Friday. A potential mega-order for up to 500 Boeing 737 MAX aircraft and 100 widebodies is the headline deliverable.

Why It Matters: For investors, a 600-aircraft Boeing order at list-price economics would value at roughly $80 billion -- the largest single commercial-aircraft order in history. Even at typical 40% list-price discounts, the bookings backlog implication is transformative for Boeing's free-cash-flow trajectory through 2030. For the broader market, a Friday tariff-suspension framework would unlock 7% of S&P upside in Chinese-exposed names. For consumers, a Boeing deal supports U.S. manufacturing employment and downward pressure on long-haul ticket prices.

What to Watch: Friday's joint statement, the specific Boeing aircraft-type mix, and any rare-earth export-license language.

Source: UNITED24 Media

5. Treasury Yields Climb -- 10-Year at 4.43%, Curve Steepens

The News: The 10-year U.S. Treasury yield climbed 7 basis points to 4.43% in the wake of the CPI release, the highest since early February. The 2-year yield rose 4 basis points to 4.06%, steepening the 2s10s curve to 37 basis points. The 30-year yield touched 4.78%, near the year-to-date high. The dollar index gained 0.2% to 98.21.

Why It Matters: For investors, the curve steepening is unusual on a hot CPI -- typically the short end rises more on rate-cut repricing. The market is signaling concern about long-term inflation expectations and term premium, not just the next FOMC. For consumers, the 30-year mortgage rate average is now 7.12%, the highest since March, and refinance applications have fallen four weeks in a row.

What to Watch: Wednesday's $42 billion 10-year Treasury auction -- weak demand would extend the move higher in yields. Tail risk is the 30-year auction next week if foreign sponsorship continues to soften.

Source: WSJ

6. Germany ZEW Sentiment Slips Ahead of Trump-Xi Summit

The News: The Germany ZEW Indicator of Economic Sentiment released Tuesday morning showed expectations softening for May ahead of the Trump-Xi Beijing summit, with respondents citing tariff uncertainty and ongoing Iran-driven energy costs. The Eurozone industrial complex remains the most sensitive to both data points, given heavy energy imports and exposure to Chinese intermediate goods.

Why It Matters: For investors, the ZEW reading is the cleanest leading indicator for the DAX's industrial-heavy composition, and softness here tends to precede Bund yield curve flattening by four to six weeks. For European consumers, sentiment translates into hiring intent and consumer durable purchases -- both of which underpin the ECB's June rate-cut debate.

What to Watch: The June 4 ECB meeting and any signaling from President Lagarde on extending the cut cycle past July if the summit fails to defuse the China-tariff cliff.

Source: ZEW

7. Boeing 600-Aircraft China Mega-Deal Hinges on Thursday Summit

The News: Boeing is pursuing what could be the largest single commercial-aircraft order in history -- up to 500 737 MAX jets and 100 widebody aircraft -- contingent on diplomatic progress at Thursday and Friday's Trump-Xi summit in Beijing. CEO Kelly Ortberg joins the U.S. delegation. A bipartisan U.S. Senate delegation pre-pressed Chinese officials this week to advance the order, and Boeing has resolved a long-standing dispute over Chinese airline access to critical spare parts.

Why It Matters: For investors, even at typical 40% discounts off list prices, a 600-aircraft deal carries free-cash-flow implications worth roughly $50 billion in present value to Boeing over the 2027-2032 delivery window. For consumers, the deal would support roughly 60,000 U.S. manufacturing jobs at Boeing and its Tier-1 supplier base, primarily in Washington, South Carolina, and the Midwest. For the airline industry, it would also relieve the Airbus narrowbody backlog that runs into 2032.

What to Watch: Friday's joint statement and any specific aircraft-type breakdown. China typically allocates orders through state purchasing channels and distributes deliveries across multiple carriers.

Source: AeroTime

8. Persian Gulf Fertilizer Supply Risk Threatens Global Food Prices

The News: Economists warned Tuesday that the ongoing Iran conflict is increasingly likely to disrupt fertilizer supplies from the Persian Gulf, which supplies roughly 30% of global urea and ammonia trade. Food prices rose 0.5% month-over-month and 3.2% year-over-year in April, with grocery items now 2.9% higher than a year ago. The Hormuz risk premium has shifted from oil-only to a broader commodities concern.

Why It Matters: For investors, fertilizer producers including CF Industries, Nutrien, and Mosaic could absorb a meaningful share of supply displacement -- CF stock has gained roughly 18% over the last month. For consumers, the lag between fertilizer prices and grocery bills runs six to nine months, suggesting a second wave of food inflation could land between October and January 2027.

What to Watch: OPEC+ production guidance at the June 1 ministerial meeting, Saudi-UAE communications around alternative shipping routes, and U.S. crop-input pricing indices through the May planting window.

Source: Reuters

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