NEW YORK — The U.S. Labor Department reported the Consumer Price Index rose 0.5 percent in May, surpassing economist expectations of a 0.3 percent increase. This marks the third consecutive month that inflation has outpaced forecasts. Core CPI, which excludes food and energy components, climbed 0.4 percent, indicating underlying price pressures across the economy.
The inflation data immediately pushed Treasury yields higher across the curve, signaling increased borrowing costs for corporations and consumers. The 10-year Treasury note yield rose nine basis points to 4.88 percent, impacting valuations for growth-oriented technology stocks. The Nasdaq index, heavily weighted by tech, traded up only 0.2 percent to 26,344, underperforming the Dow Jones Industrial Average which gained 0.6 percent to 50,580.
former Federal Reserve Chair Jerome Powell has repeatedly said that sustained progress toward a 2 percent inflation target is essential before any rate cuts can be considered. The May CPI report suggests the Federal Reserve will likely maintain its restrictive monetary policy stance for an extended period, pushing back market expectations for a September rate cut to just 25 percent probability. Goldman Sachs analysts said this inflation trend could delay rate cuts until Q1 2027.
Nvidia dropped 1.9 percent to $215.33, reflecting sensitivity to higher capital costs for data center buildouts and potential enterprise spending slowdowns. Alphabet fell 1.2 percent to $382.97, and Amazon declined 0.8 percent to $266.32, as investors reassess growth prospects under tighter financial conditions. Apple rose 1.3 percent to $308.82, its balance sheet and consistent cash flow providing a defensive hedge against rising interest rates. Microsoft ended the day down 0.1 percent at $418.57.
The Russell 2000, representing smaller U.S. companies, gained 0.9 percent to 2,869, outperforming larger peers. This indicates investors may be rotating toward companies with more localized revenue streams and less exposure to global interest rate sensitivity.
