Wall Street Brief (May 14): US stocks diverged on Wednesday with tech heavyweights leading gains, while the Dow and small caps weakened; Chinese stocks strengthened. Oil prices plummeted, easing inflationary pressures as the S&P 500 and Nasdaq continued to hit new highs.

Summary: On Wednesday, US stocks diverged upward, with the S&P 500 up 0.58%, Nasdaq up 1.20%, Dow down 0.14%, and Russell 2000 up 0.04%. The S&P 500 and Nasdaq closed at new highs. VIX fell to 17.87, a single-day drop of 0.67%, and the market did not translate PPI data into panic trading. The core contradiction of the day was clear: on one side, PPI surged, bringing rate hike risks back to the table; on the other, Jensen Huang joined Trump’s delegation to China, prompting the market to start pricing in improved AI chip export expectations. This led to a noticeable divergence in performance, with the Nasdaq and tech heavyweights strengthening, while the Dow and financials were weaker. Chinese tech stocks collectively rebounded, driven by Alibaba Cloud and AI business. In major asset classes, the dollar index rose 0.20%, gold fell 0.56%, crude oil plunged 5.18%, and Bitcoin dropped 1.50%.

I. Major Events

1. PPI sharply increased, and the risk of rate hikes returned to the forefront

The US April PPI rose 1.4% month-on-month, marking the largest monthly increase since March 2022, and 6.0% year-on-year, the highest since December 2022. On the same day, Boston Fed President Susan Collins stated that if inflationary pressures do not ease, the Federal Reserve may need further tightening. Rather than signaling rate cuts, macro conditions continue to suggest persistent high-rate constraints; the strength of tech stocks on Wednesday stemmed more from AI-related catalysts and company-level factors.

2. Jensen Huang joins Trump's visit to China, expectations for AI chip exports rise

NVIDIA CEO Jensen Huang joined Trump's delegation during his visit to China, with discussions covering US-China trade, AI, and high-end chip exports. Reuters reported that this move ignited market hopes for progress in the sale of AI chips like H200 to China. For the equity market, this news directly boosted risk appetite in the AI hardware supply chain, explaining why elevated PPI did not weigh down the Nasdaq.

II. Major Trends

The index's new highs still rely on technology-heavy components. Over a two-week period, QQQ rose by 8.03%, continuing to outperform SPY's 4.32%, IWM's 3.89%, and DIA's 0.76%. Over a three-month horizon, QQQ surged by 18.89%, while DIA only gained 0.76%. On Wednesday, the S&P 500 and Nasdaq hit new highs again, but the Dow closed lower, and small caps were nearly flat, indicating that the index's upward movement was not driven by all risky assets in unison.

The breadth has not kept up with the index. Over a three-month period, SPY increased by 9.18%, while RSP only climbed by 0.45%; over two weeks, SPY rose by 4.32%, and RSP by 1.25%. This gap shows that large-cap stocks are still providing the main support for the index, with equal-weighted portfolios showing weaker performance, and the overall diffusion quality within the market is mediocre.

Growth and tech giants continue to dominate. SPYG rose by 15.51% over three months, significantly outpacing SPYV's 2.40%; MAGS climbed by 15.34% over the same period, surpassing XMAG's 4.87%. Short-term momentum also continued to improve, with MAGS' two-week gain expanding from 3.38% to 5.93%. This is not a retreat of the growth theme but rather a further concentration within growth towards AI and large-cap tech.

III. Market Sentiment

VIX closed at 17.87, down 0.67% in a single day. Despite PPI being significantly higher than expected, volatility still retreated, suggesting the market interpreted the day as being driven more by tech catalysts rather than a full escalation of macro pressures. The CNN Fear & Greed Index stood at 66, up from the previous 65, remaining in the greedier zone. Sentiment hasn't reached extreme optimism, but it hasn't been dampened by inflation data either, with risk appetite staying at a sustainable but uneven level.

CBOE Put/Call ratios show the total Put/Call at 0.61, the index options Put/Call at 0.80, and equity options Put/Call at 0.53. Demand for protection on both indices and individual stocks has clearly declined, corroborating the drop in VIX and the slight rise in CNN Fear & Greed. The current environment is closer to selective risk expansion rather than a defensive reaction to macro data.

IV. Market Scan

1. Index ETFs:Nasdaq ETF QQQ led gains with a 1.06% rise, while Dow ETF DIA lagged behind with a 0.15% decline. Capital clearly favors allocating to AI and large-cap tech rather than evenly buying blue chips, small caps, and cyclical assets.

2. Industry sectors:In sector performance, Technology XLK rose 0.94% leading the pack, Communication XLC gained 0.78%, and Healthcare XLV climbed 0.59%; Utilities XLU fell 1.15%, and Financials XLF dropped 1.14%. This indicates that risk appetite isn't spreading evenly but is concentrated in areas tied to AI and growth narratives. In sub-sectors, Solar TAN rose 3.50%, Robotics BOTZ climbed 2.23%, Semiconductors SMH gained 2.00%, and Copper COPX increased 1.26%; Uranium URA fell 1.91%, and Regional Banks KRE dropped 1.60%. Capital continues to flow into AI hardware, clean energy, and certain resource chains, but banks and traditional defensive sectors see weak participation.

3. Seven major tech companies:Within the Magnificent Seven tech stocks, Google GOOG led gains with a 3.97% rise, Tesla TSLA climbed 2.73%, NVIDIA NVDA gained 2.29%, Meta rose 2.26%, and the seven-tech ETF MAGS climbed 2.04%; Microsoft MSFT relatively lagged with a 0.63% decline. The rise of tech heavyweights wasn't uniform, but AI-related expectations have reignited elasticity for top-tier tech companies.

4. Chinese concept stocks:Chinese stocks rebounded strongly, with Alibaba BABA rising 8.18%, Baidu BIDU climbing 7.55%, JD.com JD gaining 7.24%, KWEB rising 4.94%, Bilibili BILI increasing 4.30%, Futu FUTU gaining 4.17%, and PDD Holdings PDD climbing 4.04%. Growth in Alibaba Cloud and AI businesses boosted the market’s repricing of Chinese tech stocks, resonating with news of Jensen Huang's visit to China.

5. Cryptocurrencies:Bitcoin fell 1.50%, MicroStrategy MSTR dropped 3.46%, Palantir PLTR declined 4.37%, and Circle CRCL rose 2.36%. High-volatility themes showed clear divergence, with capital chasing AI and Chinese tech but failing to simultaneously push up Bitcoin-linked assets.

$S&P 500 Index (.SPX.US)$$SPDR S&P 500 ETF (SPY.US)$$NASDAQ 100 Index (.NDX.US)$$Invesco QQQ Trust (QQQ.US)$$Dow Jones Industrial Average (.DJI.US)$$State Street® SPDR® Dow Jones Industrial Average® ETF Trust (DIA.US)$$Russell 2000 Index (.RUT.US)$$iShares Russell 2000 ETF (IWM.US)$$Roundhill Magnificent Seven ETF (MAGS.US)$$USD (USDindex.FX)$$U.S. 10-Year Treasury Notes Yield (US10Y.BD)$$iShares 20+ Year Treasury Bond ETF (TLT.US)$$XAU/USD (XAUUSD.CFD)$Bitcoin (BTC.CC) Ethereum (ETH.CC)$SPDR Gold ETF (GLD.US)$$CBOE Volatility S&P 500 Index (.VIX.US)$$NVIDIA (NVDA.US)$$Tesla (TSLA.US)$$Meta Platforms (META.US)$$Amazon (AMZN.US)$$Alphabet-C (GOOG.US)$$Microsoft (MSFT.US)$$Apple (AAPL.US)$

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