Market Report, 2026-05-12

Inflation and interest rates took the spotlight today, as we received the first data point that makes it possible to assess how higher energy prices and other factors related to the conflict in the Middle East have impacted American consumers as input costs move through the supply chain. An important inflation gauge demonstrated significant acceleration in price increases beyond what economists were expecting. In reaction to the inflation reading, the bond market priced in substantially higher possibilities of rate hikes, now much higher than the priced-in probabilities of rate cuts, with possible interest rates by the end of 2027 being 1% higher than they are now.

The AI investment theme came under pressure due to the prospect of higher interest rates, as the industry is increasingly relying on debt financing and discount rates for future cash flows are now higher. The Philadelphia Stock Exchange Semiconductor Index ended the day 3% lower. The Dow Jones Industrial Average ended the day 56 points higher, thanks to its more balanced exposure to different parts of the market. The S&P 500 declined 0.16% to 7,401. The NASDAQ, a technology-heavy index, sank 0.87% to 29,065. Healthcare and consumer staples led today’s market due to their unique positioning against inflation and higher interest rates.

The U.S. 5-year yield rose 6 basis points to 4.13%, its highest point so far this year. The 10-year yield rose 5 basis points to 4.46%.

Tomorrow, a gauge of inflation for producers will be released, providing further insight into the cost structure of the economy. Adams Wealth Advisors will keep you updated.