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US stocks climbed even as inflation stayed uncomfortable and oil remained elevated, because growth and jobs data looked solid rather than scary and core inflation matched expectations. Under the surface, investors rotated out of some of the biggest AI winners — Meta, Nvidia, Microsoft — and into smaller, cheaper, and more cyclical names, with industrials, utilities and small caps leading and overall breadth very strong. Volatility fell and bond yields ticked slightly lower, suggesting markets see no immediate rate hike, but central banks remain on watch as oil and inflation expectations creep higher. The key from here is whether high energy prices and a tight labor market force the Fed and its peers toward actual hikes, and whether today’s wobble in AI heavyweights turns into a bigger unwind of the recent tech mania or just a healthy rotation.

Today probably felt a bit backwards: inflation is running hot, oil is expensive, the Fed is on edge — and yet stocks mostly rallied, just not in the way of the last few years.

The big story: “OK” growth beats “scary” inflation

A big batch of data this morning said the US economy is still humming:

Q1 GDP grew 2% (a solid pickup from 0.5% last quarter).
Core PCE inflation — the Fed’s favorite gauge — came in as expected, even though headline inflation and the overall price index were hotter.
Wages and benefits jumped, and new jobless claims fell to levels described as a 57‑year low.

Put simply: growth is decent, people have jobs and are spending, and while inflation is uncomfortable, it wasn’t worse than markets had braced for. That was enough to tilt the day toward “risk-on.”

The S&P 500 rose about 1%, the Nasdaq nearly 0.9%, and small caps surged more than 2%. The volatility index (VIX) dropped about 10%, signaling less near‑term fear, even though it swung around intraday.

The twist: rotation away from the AI royalty

Under the surface, this was not a “tech saves the day” session.

Big tech just reported a wave of earnings. Alphabet (Google) soared around 10% on strong AI news, but Meta, Nvidia and Microsoft were hit hard as investors digested enormous AI spending plans and rich valuations. There’s open talk in trading desks about “mania” in chip stocks and worries that some bets will be hard to unwind.

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Stocks climb on sturdy growth as money rotates out of AI mega-caps

Market Events

The big story: “OK” growth beats “scary” inflation

The twist: rotation away from the AI royalty

US Stock Market

Stocks climb on sturdy growth as money rotates out of AI mega-caps

Market Events

The big story: “OK” growth beats “scary” inflation

The twist: rotation away from the AI royalty