Capital Idea: Market wrap, 14 May

• Wall Street surges to fresh all-time highs despite PPI surprise

• Senate confirms Kevin Warsh as next Chairperson of the Fed

The runaway freight train that is US tech kept powering higher overnight, pulling Wall Street to fresh record highs. The move could be said to be a bit long in the tooth and losing momentum in the short-term. However, with the AI trade and the prospect of strong tech earnings all the rage again, investors want themselves a slice of the pie.

Easing geopolitical risk is supporting the market. US President Trump begins his visit to China as focus shifts from geopolitics to trade. The vacuum that has been created has allowed the markets to drift higher as the inertia from a remarkable US earnings season propels equities higher. There are still risks on the horizon when it comes to US and Iran tensions. Peace talks are tenuous and the Strait of Hormuz is still closed, choking global energy markets. However, with President Trump in China, it’s unlikely the US will escalate the conflict while conducting a state visit with one of its adversaries’ allies. Equally, Iran will be conscious of aggravating its key ally during such a high-stakes period for US-China relations.

The Teflon market lived up to its status again last night as producer price data came in much spicier than expected. Annual PPI rose 6% last month, far exceeding expectations of 4.8%. The components that feed into the PCE Index – the Fed’s preferred inflation gauge – were admittedly reasonably well behaved. However, the data continues to add to the case—which equity prices are either ignoring or simply taking in stride—that the Fed could hike rates before the end of the year. Currently, the Fed Fund Futures curve implies a nearly 40% chance of a hike. The focus on the Fed’s path forward is sharpened following Kevin Warsh’s confirmation as Fed Chairperson overnight. Will he be the sort of dove that ostensibly landed him Trump’s nomination for Chair, or will he revert to his old hawkish self?