S&P 500 Hits Record High Despite Inflation Uptick Amid Powell’s Warnings On Trump’s Tariffs

Inflation showed signs of persistence in May, with key consumer price data showing modest monthly increases and the annual rate drifting further above the Federal Reserve’s 2% target.

However, markets did not have much of a reaction to the data. The S&P 500 (SPX) surged to an all-time high of 6178.74 on Friday, surpassing its previous record of 6,168 reached in February earlier this year. 

While the SPDR S&P 500 ETF (SPY) jumped 0.5% on Friday morning, the Invesco QQQ Trust Series 1 (QQQ), which tracks the tech-heavy Nasdaq 100, and the SPDR Dow Jones Industrial Average ETF (DIA) climbed more than 0.6% each. 

The personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, rose 0.1% on a seasonally adjusted basis, according to data released Friday by the Bureau of Economic Analysis. This puts the annual inflation rate at 2.3%.

Excluding food and energy, the core PCE index also rose 0.2% on the month and 2.7% on the year. The annual core figure was up from 2.6% in April and remains a key concern for the Federal Reserve, which views the core reading as a better reflection of underlying inflationary pressures.

Beyond inflation, the report showed signs of consumer fatigue. Personal spending declined 0.1% and personal income also fell 0.4% in May.

The data support Chair Jerome Powell’s position to hold off on rate cuts until further evidence shows inflation easing. Earlier this week, during his testimony to Congress, Powell said the central bank is still trying to understand the full impact of President Donald Trump’s tariffs. 

“The question is, who’s going to pay for the tariffs? How much of it does show up in inflation? And honestly, it’s very hard to predict that in advance,” he said.

Trump, on the other hand, has been threatening to replace the Fed Chair. He even said that he has three to four candidates in mind. 

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Read also: Buying More US Weapons Under NATO Budget Jump Will Help Fix Trade Rift With Trump, Says EU Council Chief