AI-Driven Gains Propel S&P 500 and Nasdaq Despite Inflation Fears

The S&P 500 and Nasdaq indices rallied on Wednesday, buoyed by strong performances in artificial intelligence-related technology shares. This surge helped offset concerns following alarming inflation data, as well as the potential for the Federal Reserve to maintain its restrictive monetary policy.

Significant gains were recorded by six of the Magnificent Seven group of megacap tech companies, following a sharp rebound in chip stocks. Despite a Labor Department report indicating a 1.4% rise in producer prices, the largest monthly increase in four years, markets remained optimistic.

Meanwhile, geopolitical issues further affected market sentiments. President Trump, accompanied by executives from Nvidia and Tesla, arrived in Beijing for a summit with President Xi, amid rising tensions over U.S. arms sales to Taiwan and potential hurdles for Chinese chipmakers. Despite these challenges, Morgan Stanley raised its annual target for the S&P 500, bolstering market confidence.

(With inputs from agencies.)