A Bull Run Anchored in the AI Trade
Equity markets have continued to push into record territory, gyrating but holding their ground through a steady stream of earnings releases and macroeconomic data. What stands out most about the current advance is the way investors have chosen to look past mildly hot inflationary signals and instead concentrate on the dominant narrative driving capital flows: artificial intelligence and the enormous capital expenditure being committed by the major hyperscalers.
That capex story is doing much of the heavy lifting. Within the technology sector itself, however, the rotation has not been uniform. Chip names have been catching renewed bids and showing positive signs of life, while certain mega-cap software counterparts have shown weakness, with one prominent name trading down around the $400 level. The result is a market in which leadership is shuffling internally even as the broader trend remains intact.
Volatility, sitting near 18, is relatively muted. Technically, the tape is producing higher highs and higher lows — the classical signature of a healthy uptrend. Importantly, this session has shown a slightly different complexion than recent ones: financials are participating to the upside, supported by the recent move higher in interest rates. That participation matters disproportionately when information technology and communication services are not pulling in the same direction, because it allows the S&P 500 to grind forward on a broader base.
A Closer Look at the Economic Data
The morning's macro data offered a mostly constructive read with some inflationary fingerprints attached.
Initial jobless claims came in at 211,000, slightly above expectations but still low by any reasonable historical standard. Retail sales held up well on both the headline and core measures. Core retail sales advanced 0.7% month over month, matching consensus and only stepping down from a prior 1.9% print that always looked like an outlier. The headline figure rose 0.5%, in line with expectations, and the all-important control group — which feeds directly into GDP — came in at 0.5% against a forecast of 0.4%.
Two caveats sit on top of these numbers. First, retail sales are not adjusted for inflation, so the 2.8% rise in gasoline and gas station receipts mechanically lifts the print. Second, bar and restaurant sales climbed 0.6% on the month, an increase that likely reflects a mix of higher menu prices and seasonal momentum as consumers ramp up summer spending. From a central bank perspective, the data is encouraging on one critical point: there is no evidence yet of a broad breakdown in consumer spending, even as inflation pressure lingers in the background and bleeds through producer-price data.
Import and export prices, on the other hand, came in hotter than expected and reinforced the sticky-inflation thesis. Export prices rose 8.8% year over year — roughly double expectations — while import prices excluding petroleum rose 0.7% on the month and 4.2% on the year, the highest levels seen since 2022. Transportation and logistics have grown markedly more expensive, not only because of fuel costs but also because shipping routes around the world remain dislocated. Cargo is frequently in the wrong place, and routing decisions designed to avoid choke points such as the Strait of Hormuz add further cost. Tariffs play a role too — not directly in the price components themselves, but indirectly, as producers pass tariff costs through to consumers and those marked-up goods show up in the price data.
Business inventories rounded out the picture, rising 0.9% month over month for March against an expected 0.8% and improving on the prior 0.4% reading. Counterintuitively, this is a useful development for anyone wanting to see inflation cool: rising inventories pressure retailers to discount and push prices lower, creating a natural counterbalance. Retail inventories excluding autos came in at 0.4%, slightly better than the 0.5% expectation. Across the past six months, inventory trends have been remarkably steady without a clear directional bias.
The China Summit: Symbolism Now, Substance Later
A two-hour round of talks in Beijing concluded as "positive and constructive," but with no signed deliverables. That is not unusual. Concrete announcements typically arrive at the very end of these processes — often only after the president boards Air Force One and offers comments mid-flight — and Chinese state media tend to move at their own measured cadence. A more formal statement should follow within a day.
Several threads are worth tracking. There has been talk of China buying more US energy, particularly oil sourced from Alaska. This is best understood as a longer-term arrangement. While greater Chinese imports from the United States would be welcome from a trade-balance standpoint, an aggressive pivot away from Middle Eastern and African suppliers would also erode China's strategic influence in those regions, and Beijing is unlikely to surrender that lightly. It is also worth noting that some of the Alaskan export facilities currently under construction already involve significant Chinese stakeholders, meaning any new commitment may be more of a political gesture than a fundamental shift in energy diversification.
On the technology side, fresh reporting suggests approval for sales of advanced H200 chips into China. This is a headline that has been recycled for five to six months, but the latest version carries more specifics: approved customers could buy up to 75,000 chips apiece, with names such as Alibaba, JD.com, and Tencent in the mix. The US side of the equation has not been the holdup. The real friction has been on the Beijing side, where soft restrictions have been used to discourage these chips from flowing into the country. Whether this iteration finally turns into actual orders remains to be seen.
Separately, there are reports that roughly $30 billion in goods moving between the two countries could be earmarked for reduced tariffs. As with everything else, the granular details will take time to surface.
The Commodity Tell
If equity markets are choosing optimism, commodity markets are sending a more skeptical signal. Across the physical commodity complex, almost everything traded lower on the session. Soybeans, wheat, corn, palladium, platinum, and silver were all in the red. The notable exceptions were live cattle and feeder cattle, both bid, which hints at the possibility of a cattle-focused arrangement with China.
The takeaway is that commodity traders wanted to see something tangible — concrete actions, specific import and export quotas, line items on raw materials — and the summit did not deliver. The AI and chip narrative pulled technology higher on summit-related optimism, but the physical-goods market is reserving judgment until it can see hard commitments.
Putting It All Together
The current setup looks like this: a market trending solidly higher on the strength of AI capital expenditure, with intra-sector rotation keeping the move from becoming dangerously narrow; consumer spending holding up; inflation showing up in transport, gasoline, and tariff pass-throughs but not yet derailing the broader picture; inventories slowly building in a way that may eventually pressure prices lower; and a US-China relationship that, at the very least, is being managed rather than allowed to spiral out of control as it did last year.
No single piece of news today was a decisive market mover, but the cumulative tone is one of cautious resilience. A floor is being placed under the world's most important bilateral relationship, the consumer remains intact, and the AI investment cycle continues to underwrite the bull run. For now, that combination is enough to keep equities at record highs even as the inflation backdrop refuses to fully cooperate.