U.S. stock markets reached new all-time highs on Thursday, with the S&P 500 closing at 7,501.24, up 0.77%, and the Nasdaq gaining 0.88% to 26,635.22. The Dow Jones Industrial Average jumped 370 points to 50,063.46, recapturing the 50,000 level for the first time since the Iran war began in February.
The rally was driven by cautious optimism following the Trump-Xi summit in Beijing, where both sides agreed that the Strait of Hormuz must remain open to support the free flow of energy. Oil prices had been a major source of market volatility since the Strait was disrupted, and any signal that shipping lanes could return to normal has been welcomed by investors.
However, beneath the surface of the stock market rally, a global producer-price crisis is accelerating. India's Wholesale Price Index exploded to 8.30% year-over-year in April, nearly double the consensus estimate of 4.40%, with fuel costs surging 24.71%. Japan's Producer Price Index rose 2.3% month-over-month, more than triple the expected 0.7%. U.S. export prices jumped 3.3%, well above the consensus of 1.1%.
UK Q1 GDP came in at 0.6% quarter-over-quarter, in line with expectations, while March GDP beat at 0.3% versus an expected contraction of 0.1%. The European Central Bank is watching inflation data closely, with strong readings potentially cementing market expectations of a June rate hike.
The tension between rising stock prices and accelerating producer costs has analysts warning that markets may be underpricing inflation risk. The forward price-to-earnings ratio for the S&P 500 stands at 20.9, above both the five-year and ten-year averages.