Stocks Set Records as Inflation Hits a Three-Year High
The headline is record highs — again. The S&P 500 and Nasdaq both closed at fresh all-time highs on Thursday. But the closer you look at what’s happening beneath the index level, the less this looks like a story about strength. It’s a story about who’s still buying, and who’s quietly running out of money.
A record day that barely moved
For all the all-time-high headlines, Thursday was a remarkably flat session at the top. The S&P 500 rose 0.58% to a record close of 7,563, and the Nasdaq did the heavy lifting with a 0.91% gain to 26,917 — both fresh records, both intraday all-time highs. The Dow was the odd one out, essentially flat at 50,669, up a rounding-error 0.05%. When an index prints a record but the move is a fraction of a percent, the headline is doing more work than the market.
How the session flipped
It didn’t start that way. Stocks opened lower, with oil climbing overnight after fresh US strikes near the Strait of Hormuz. Then the mood turned. A strong forecast from Snowflake reignited enthusiasm for the AI trade, and a reported agreement between US and Iranian negotiators to extend the ceasefire pulled some of the risk premium back out of crude. By the close, tech was firmly back in the lead — the same AI-infrastructure trade that has carried this market all year.
The number the record buries
The morning’s real story was inflation. The Federal Reserve’s preferred gauge, the personal consumption expenditures (PCE) price index, rose 3.8% over the past year — its hottest reading in nearly three years, up from 3.5% the month before. The driver was unsubtle: the oil shock from the Iran conflict feeding straight into gas prices. Core inflation, which strips out food and energy, ran at 3.3%.
The monthly figures came in a touch cooler than expected, which offers a sliver of hope that the recent burst is easing. But the annual trend points the wrong way, and the data underneath it is worse. The personal savings rate fell to 2.6%, the lowest since June 2022, as households dip into savings just to keep up with prices. Real disposable income fell. And first-quarter economic growth was revised down to 1.6%, from an initial 2%. Slowing growth, re-accelerating inflation, and a consumer reaching into the piggy bank — not the backdrop you’d draw up for record highs.
Why this traps the Fed
For the Federal Reserve, that combination is a vise. Inflation running near 4% takes rate cuts off the table; traders are now betting the central bank’s next move could be a hike early next year rather than a cut. That’s a meaningful shift — a market that spent much of the past two years pricing easing is now bracing for the opposite. And Wall Street is starting to name the disconnect out loud: strategists at Bank of America told clients this week to prepare for a summer pullback after what they called a relentless rally.
Dell’s blowout — and the AI trade
The exclamation point came after the close. Dell reported quarterly revenue of $43.84 billion, up 88% from a year ago and well past expectations, and the stock jumped more than 25% in after-hours trading. The engine was AI-optimized servers — a business that alone brought in $16.1 billion, up a staggering 757% year-over-year — and Dell raised its full-year forecast for AI server sales to $60 billion. Separately, Dell landed a five-year, roughly $9.7 billion software contract with the Pentagon this week, a real government win, though that one is a Microsoft licensing deal rather than part of the AI-server story.
The contrast with Costco was sharp. Costco beat on sales, up 11.6%, but came in just light on earnings — and on a stock priced for perfection, the reaction was a shrug. The market is paying up for AI-infrastructure growth and demanding flawless execution everywhere else.
Records on the screen, strain in the data
Step back and the picture resolves into a single tension. The market is throwing a party for the AI build-out, and Dell just confirmed that demand is still accelerating — so the party is real. But it is happening on top of a consumer draining savings to pay for gas, and a Fed with no room left to cut. Records on the screen; strain in the data. The further those two drift apart, the more “record high” describes the headline than the health of the market underneath it.
Not investment advice. WTH Markets is editorial commentary, not financial guidance.
Related
RecapWhy a Strong Jobs Report Sold Off the Stock Market
Wall Street's worst day since October: a blowout May jobs report pushed yields up and rate-cut odds down, and the crowded AI-chip trade had the furthest to fall.
RecapBroadcom Lost $300 Billion — and the Market Hit a Record
Broadcom took one of the largest single-day losses in market history — and the Dow still closed at a record. That's not a crash. It's a rotation.
RecapThe Market Beat Its Own Earnings and Sold Anyway
Stocks fell from record highs as an oil shock hit the real economy — then Broadcom and CrowdStrike beat earnings and sold off anyway. The split, and what's next.