Wall Street reached new highs Wednesday, with the S&P 500 climbing 0.6% to 7,444.25 and the Nasdaq composite jumping 1.2% to 26,402.34, even as the majority of U.S. stocks declined. The rally was driven almost entirely by technology companies, whose shares recovered from a sudden pause in momentum the previous day and insulated major indexes from a wave of discouraging inflation data.
The Dow Jones Industrial Average dipped 67.36 points, or 0.1%, to close at 49,693.20, reflecting the broad weakness outside the technology sector. The sharp divide underscores Wall Street’s growing dependence on artificial-intelligence growth to absorb macroeconomic headwinds. With wholesale prices rising faster than economists anticipated and consumer inflation also accelerating, investors are increasingly pricing out the possibility of Federal Reserve rate cuts this year.
“Corporate earnings and AI momentum are acting as the market’s primary shock absorbers, but the road is getting significantly rougher,” said Tim Waterer, chief market analyst at KCM Trade.
Technology giants and semiconductor manufacturers led the advance. Micron Technology rose 4.8% and On Semiconductor gained 11.1%, rebounding after a brief sell-off in AI-linked stocks. Nvidia climbed 2.3%, serving as the strongest upward force on the S&P 500 due to its market weight. Nvidia CEO Jensen Huang received an invitation from President Donald Trump to join an upcoming trip to China, where the delegation could discuss permitting shipments of Nvidia AI chips to the country.
International tech players also posted strong sessions. Japan’s SoftBank Group reported that profit for the 12 months ending in March surged nearly five times year-over-year, driven by successful artificial-intelligence investments. In the United States, shares of Alibaba Group rose 8.2% after the company reported accelerated growth in its AI and cloud segments, despite overall quarterly results falling short of analyst expectations.
Beneath the headlines, inflation pressures mounted across the economy. A wholesale price report released Wednesday showed costs were considerably worse last month than forecast, following a Tuesday report that consumer-level inflation was also accelerating. Tariffs, adverse weather affecting food supplies, and other structural factors are driving prices higher. The dominant force, however, remains elevated oil prices stemming from the war with Iran, which has disrupted global crude flows.
Brent crude fell 2% on Wednesday to settle at $105.63 a barrel, a modest retreat after early-week gains. The oil price remains well above the roughly $70 per barrel level seen before the conflict erupted. The International Energy Agency warned that worldwide oil inventories are draining at a record pace. The sustained energy price shock has forced traders to abandon expectations for a Federal Reserve rate cut in 2026, with some market participants now viewing a rate hike as the most likely outcome.
Higher borrowing costs weighed heavily on income-sensitive sectors. The yield on the 10-year Treasury note edged up to 4.47% from 4.46% late Tuesday, staying well above the 3.97% level recorded before the war. Rising yields made bond returns more attractive relative to equities, sending utility and real estate stocks to some of the steepest losses in the S&P 500. American Electric Power fell 3% after the company announced a $2.6 billion stock offering.
Corporate earnings reports revealed direct tariff impacts elsewhere. Birkenstock Holding fell 12.9% after the British footwear company said its latest quarterly results were hurt by U.S. tariffs and other operational factors.
In overseas markets, indexes advanced across much of Europe and Asia. South Korea’s Kospi led regional gains with a 2.6% jump, rebounding from a 2.3% loss on Tuesday. The previous day’s decline followed comments from a senior government official suggesting potential redistribution of windfall AI profits to citizens, a proposal that temporarily sapped momentum from AI-linked stocks worldwide.