US April inflation data printed hotter than market forecasts, but Wall Street stocks defied hawkish signals and extended gains to brand-new historical highs.

Core Inflation Data

• Headline CPI: 3.8% YoY
• Core CPI: 2.8% YoY
• April PPI: 6% YoY (highest since 2022)
• Monthly energy cost rise: 7.8%
• Transport & logistics service price gain: 5%

source：BLS

Bond markets reacted in traditional hawkish fashion. The 10-year US Treasury yield moved higher, pushing market bets for Fed rate cuts further into 2026, with many investors even ruling out easing expectations entirely.

In sharp contrast, risk assets maintained strong upward momentum. Both S&P 500 and Nasdaq closed at all-time peaks.

Reason for Market Divergence

Morgan Stanley divides current inflation pressure into two clear categories:

1. Transitory energy-driven inflationCrude prices have stabilized recently, and extra inflation pressure triggered by geopolitical tensions is gradually peaking, without forming long-term upward momentum.
2. Distorted housing inflation dataShelter costs jumped 0.6% monthly, hitting a two-year high. Such sharp growth mainly came from temporary statistical adjustments, rather than solid real demand expansion.

Meanwhile, market price fundamentals remain steady:

• Core goods prices stayed flat month-on-month
• New vehicle prices showed downward tendency
• Tariff-related cost pass-through has not yet fully reflected in official figures

Core Market Focus: Cost Bearing Logic

Before data release, Morgan Stanley strategist Matt Hornbach advised investors to track CPI, PPI and import prices comprehensively, to judge the trend of PCE inflation — the Fed’s most preferred policy reference indicator.

The institution holds a clear core view:Most rising upstream costs are absorbed by enterprises, instead of being fully passed to end consumers.Facing soaring energy spending and massive AI infrastructure investment expenditure, enterprises choose to compress profit margins to avoid suppressing overall social consumption capacity.

For this reason, Morgan Stanley confirms no Fed rate cuts will take place in 2026. Core inflation will naturally cool down after energy-led price surges subside.

Asset Trend Outlook

✅ US Treasury BondsYields still have upside room; the 10-year yield may test the key level of 4.50% if industrial upstream price pressure persists. Current market has already priced in most hawkish expectations, and further price dips serve as better entry opportunities.

✅ GoldGold prices remained stable amid hot inflation prints. Its medium-term bull logic remains intact. Sustained high interest rates will continuously accumulate recession risks. Price correction within the range of $4500–$4600 brings ideal buying timing.

Final Market View

Current inflation conditions are mixed and complicated.Energy price momentum is fading, housing data contains obvious interference factors, and tariff transmission effects are lagging behind.

Equity investors focus on long-term fundamentals and ignore short-term data fluctuations, while bond investors prefer to hedge against policy uncertainties.

Latest inflation figures will not reverse the mainstream market judgment, yet they will inevitably delay the whole timeline of Fed monetary policy adjustment.