US markets hit record highs despite inflation surge

NEW YORK - U.S. stock markets rallied on May 13 with the S&P 500 and Nasdaq closing at fresh record highs, as artificial intelligence-related megacap stocks rebounded despite hotter-than-expected inflation data. The tech-heavy Nasdaq gained 314.14 points, or 1.2 per cent, to 26,402.34, while the S&P 500 rose 0.58 per cent. Six of the Magnificent Seven AI-related giants gained between 1.4 and 3.9 per cent, with Nvidia and Tesla advancing 2.3 per cent and 2.7 per cent respectively. The rally came as a Labour Department report showed producer prices jumped 1.4 per cent in April, the largest monthly increase in four years, with soaring oil prices beginning to seep into other economic segments. The inflation data is dousing hopes for a near-term Federal Reserve rate cut, with Boston Fed president Susan Collins suggesting a rate hike could be on the cards if inflation pressures fail to subside. Morgan Stanley raised its annual target for the S&P 500 to 8,000 from 7,800, citing strong corporate earnings. Meanwhile, President Donald Trump arrived in Beijing for a two-day summit with President Xi Jinping, accompanied by Nvidia CEO Jensen Huang and Elon Musk, with discussions expected to focus on trade, export controls, tariffs and semiconductor restrictions. Washington reportedly cleared sales of Nvidia's H200 AI chips to approximately 10 major Chinese technology firms including Alibaba, Tencent, ByteDance and JD.com, a potential breakthrough for China's AI sector. Goldman Sachs analysts said they do not expect a sweeping "grand bargain" but said the meeting could act as a "tactical catalyst" for the Chinese yuan and equities. Chinese tech investors are particularly focused on chip access, with Barclays noting that Nvidia's latest chips remain "very, very critical" for Chinese companies to compete globally. The Hang Seng Tech Index edged 0.5 per cent higher Thursday, with the broader Hang Seng Index climbing 0.3 per cent. Year-to-date, the Hang Seng Index is up more than 3 per cent while the Hang Seng Tech Index is down over 7 per cent, lagging behind regional markets in Japan, South Korea and Taiwan that have benefited more from the AI boom.