New York, May 12, 2026, 11:09 EDT
- U.S. equities edged lower following an April CPI print that topped forecasts, as stubbornly high energy and shelter prices complicated the Federal Reserve’s outlook for rate cuts.
- Nasdaq dropped the most, with AI and chip stocks losing steam. Growth names that pushed the market to new highs got slammed by oil-driven inflation and rising Treasury yields.
- Rate-cut bets kept slipping away, with prediction markets now showing a strong likelihood the Fed stays put in June. Over on Polymarket, traders have “zero 2026 cuts” leading the pack. DeFi Rate
Stocks in the U.S. lost ground Tuesday morning, as April’s inflation reading came in hotter and oil prices pushed higher, cutting short the market’s record-setting streak. Right around 10:54 a.m. ET, the SPY, which tracks the S&P 500, slipped roughly 0.7%. The QQQ fell about 1.2%, with the Dow’s DIA off 0.6%. Small caps fared worse— IWM dropped 1.8%. The XLE, representing energy stocks, managed to hold just above water.
There’s little mystery behind the shift: inflation isn’t just an energy story anymore. The Consumer Price Index jumped 0.6% in April, pushing the annual gain to 3.8%. Core CPI—excluding food and energy—added 0.4% for the month and is up 2.8% from a year ago. Gasoline prices surged 5.4% in April alone, climbing 28.4% over the past year, leaving traders with little reason to brush off the data as background noise.
The market’s been leaning on a soft landing, upbeat earnings, and a still-accommodative Fed, so a hotter CPI lands hard. It nudges the Fed toward keeping rates higher for longer—never good news for growth stocks, since their future profits get discounted more heavily. Reuters showed the 10-year Treasury yield ticking up to 4.45%. The 2-year moved to 3.98%. That’s the bond market signaling no rate cut relief anytime soon.
There was a twitch of stress in today’s action. Nvidia ticked higher at the open, while Intel and Qualcomm slipped. Reuters reported consumer discretionary shares took the biggest hit among sectors. It wasn’t a sweeping risk-off move, more of a shuffle—money peeling away from packed AI and growth names, drifting toward firms managing to push through inflation or gain from pricier energy.
Oil’s playing a big role here. Brent crude climbed 3.4% to $107.72, AP said, with the U.S.-Iran ceasefire looking shakier and tankers still stuck outside the Strait of Hormuz. That jump is hitting gasoline, airlines, power providers, and squeezing corporate margins. No surprise, the surge in crude rattled the Nasdaq just as much as energy stocks.
The bullish thesis hasn’t disappeared. Earnings are holding their ground, with parts of the industrial automation sector still showing strength. Zebra Technologies shares rallied after reporting first-quarter sales of $1.495 billion and non-GAAP earnings at $4.75 per share. CEO Bill Burns pointed to “continued momentum into the second quarter,” driven by demand for automation and Physical AI. Zebra Technologies
Bears don’t hesitate: inflation’s spreading, the rally’s pricey and packed with buyers. Doug Beath, global equity strategist at Wells Fargo Investment Institute, points out markets have been “slow to appreciate the economic damage” tied to rising costs, oil, and raw materials. After Monday’s record finishes, that threat looks sharper—stretched charts mean average data won’t cut it. Reuters
Prediction markets are leaning into that wariness. The latest FOMC odds tally puts a June Fed hold at 97.5%, with Polymarket tracking 97.6% and Kalshi showing 96.5%. Looking out to 2026, Polymarket assigns a 62% chance to zero Fed cuts, while a single quarter-point trim sits at 19%. Kalshi’s Fed board? It also places zero cuts as the frontrunner for 2026, at 58%.
Still, a few holdouts persist in the rate debate. Reuters columnist Jamie McGeever points out that Citi and MUFG are sticking with calls for 2026 cuts, arguing the labor market and broader economy aren’t as solid as they seem. That view has become rare. Traders are mostly pricing in a Fed that stays put—unless growth falters more sharply.
Earnings from individual names brought fresh wrinkles to the market picture. Hims & Hers slid, rattled by higher expenses after swapping compounded GLP-1 weight-loss offerings for big-name brands like Novo Nordisk’s Wegovy, a move that also delivered an unexpected Q1 loss. The same pricing and regulatory questions hang over rivals and partners, namely Novo Nordisk and Eli Lilly. Bottom line: top-line growth doesn’t cut it when profitability is under the microscope.
The market isn’t calling time on the expansion just yet. What’s changed: the straightforward gains now need new validation. Without a pullback in oil, or a clear halt to inflation bleeding into core categories—and unless earnings growth spreads past the usual AI and automation names—investors seem more inclined to treat downturns as hurdles instead of bargains.
