Dow Reclaims 50,000 and S&P 500 Hits Record as Trump-Xi Summit Rallies Wall Street Despite 3.8% Inflation

The Dow Jones Industrial Average climbed back above 50,000 at the opening bell Thursday as Wall Street rallied on early signs of progress at the Trump-Xi summit in Beijing and a stronger-than-expected quarterly earnings report from Cisco Systems. The S&P 500 added another 0.4 percent in early trading after closing Wednesday at a record 7,444.25, while the tech-heavy Nasdaq Composite rose 0.7 percent to 26,402.34. The Dow is now up roughly 11 percent year-to-date and the S&P 500 is up 8 percent, despite an inflation spike that pushed the consumer price index to 3.8 percent in April.

Cisco shares jumped more than 9 percent in pre-market trading after the networking giant reported fiscal third-quarter revenue of $14.7 billion, beating analysts' consensus estimate by about $400 million, and raised its full-year forecast on the strength of orders for AI infrastructure gear. Chief Executive Chuck Robbins said on the earnings call that "AI-related demand is no longer a future story — it is the dominant driver of our backlog right now," and disclosed that the company has booked more than $4 billion in AI orders in the trailing nine months. The report lifted other networking and chip stocks, with Arista Networks up 6 percent and Nvidia up 2 percent.

Beneath the headline rally, the inflation picture remains uncomfortable. The Labor Department's April CPI print, released Tuesday, showed prices accelerating to a 3.8 percent annual rate, the hottest reading since 2023, driven largely by a 28 percent jump in gasoline prices tied to the Iran war and the Strait of Hormuz blockade. Wholesale prices, measured by the producer price index, rose about 6 percent on an annual basis — their largest increase since 2022 — suggesting consumer prices have further to climb. Fed funds futures now price in roughly a 60 percent probability of a rate hike at the Federal Reserve's June 17-18 meeting, up from 22 percent a week ago.

The University of Michigan's preliminary May consumer sentiment index, released Friday, fell to 48.2, the lowest reading in the survey's history dating to 1952, as households reported the steepest deterioration in their assessment of "buying conditions" since the early-1980s recessions. Year-ahead inflation expectations jumped to 6.5 percent, the highest since the early phase of the pandemic recovery. "Sentiment data and the equity market are telling completely different stories," said Diane Swonk, chief economist at KPMG, in a note to clients. "Wall Street is trading the China handshake; Main Street is watching the gas pump."

Looking ahead, traders are bracing for a busy stretch. Retail sales data for April land Friday and are expected to show a sharp pullback in discretionary spending. Walmart and Home Depot report earnings next week, and the Fed's semiannual monetary policy report to Congress is scheduled for May 21. Treasury Secretary Scott Bessent told Bloomberg Television from Beijing on Thursday that the administration was "open to surgical tariff relief on Chinese consumer goods" if the summit produces a credible framework deal — comments that briefly pushed the 10-year Treasury yield down five basis points to 4.31 percent before it retraced higher into the afternoon.