Major U.S. indices closed higher this week, with the Nasdaq leading the way as record-setting moves in AI and chip stocks absorbed an otherwise difficult macro backdrop. The S&P 500 added 2.36%, the Dow ticked up 0.25%, and the Nasdaq rallied 4.52%. Beneath the headline gains, three forces shaped the tape: an inflation reading that came in hotter than expected, a contentious confirmation vote at the Federal Reserve, and a fresh signal that AI infrastructure spending is now pushing into orbit.
April CPI accelerated to 3.8%, the highest since May 2023
The Bureau of Labor Statistics reported Tuesday that consumer prices rose 0.6% in April, putting the annual rate at 3.8%, the highest since May 2023 and up sharply from 3.3% in March.1 Energy prices, which jumped 3.8%, accounted for more than 40% of the headline gain, while food prices climbed 0.5%. For energy, that put the 12-month gain at 17.9%, and the gasoline index alone increased 28.4% annually.
The cause has been clear for weeks: the war with Iran continues to constrain global oil supply. Consumers paid a national average of $4.50 per gallon as of Tuesday, according to AAA, up from about $3.14 a year ago. Core CPI, which strips out food and energy, was no comfort either, rising 0.4% on the month and 2.8% annually, well above the Fed's 2% target.2
The report also confirmed the squeeze on workers. Real average hourly wages slipped 0.5% for the month and fell 0.3% annually, meaning paychecks lost ground to prices for the first time in this cycle. Mark Zandi, chief economist at Moody's Analytics, framed the broader concern in stark terms before the release. "The pass-through will broaden to nearly all manufactured goods, which are energy-intensive, as well as to agriculture and construction," he said. The implication is that the April print is unlikely to be a one-off.
The S&P 500 cleared 7,500 as AI chip stocks led the rally
Equity markets shrugged off the inflation data and pushed to fresh highs. The S&P closed above the 7,500 level for the first time in history, driven by a surge in AI-related tech stocks, while President Donald Trump and Chinese President Xi Jinping met for two hours and 15 minutes at the start of their two-day summit. The broad-based S&P 500 rose 0.58% to close at 7,444.25 mid-week, while the Nasdaq Composite gained 1.2% to 26,402.34, with both indexes reaching new intraday and closing highs. The Dow Jones Industrial Average fell 67.36 points, or 0.14%, to end at 49,693.20, reflecting a market increasingly bifurcated between AI winners and everyone else.3
Semiconductors have done much of the heavy lifting. Memory and storage sellers Micron Technology and Sandisk soared more than 15% in recent sessions, lifted by strong demand from the rapid buildout of AI data centers, with the Philadelphia SE Semiconductor index up 55% so far in the second quarter. The story underneath the numbers is straightforward: capital is flowing toward whoever sells the picks and shovels of the AI buildout.
Kevin Warsh confirmed as Fed chair in the narrowest vote on record
On Wednesday, the Senate confirmed Kevin Warsh as the next chair of the Federal Reserve. The 54-45 vote was the closest in the modern era, and President Trump has made no secret that he expects Warsh to lower rates after having lashed out repeatedly at outgoing Chair Jerome Powell.4 Warsh inherits a central bank whose independence has been openly contested and an inflation problem that complicates the political mandate he was hired with.
The internal arithmetic is already tight. The incoming Fed chief has proposed or hinted at reducing the size of the Fed's $6.7 trillion balance sheet, coordinating more closely with the Treasury Department on the balance sheet, cutting back on the number of policy meetings each year from eight to as little as four, hosting fewer news conferences, shrinking the Fed's Washington-based workforce, and not providing frequent hints on the path of interest rates. According to JPMorgan analysts, all those changes would be within the remit of Warsh's power as chair. Traders largely expect the Fed to hold rates steady for the rest of the year, though the odds for a rate hike have risen to 20% for October and are pegged at 30% for December. For households, that means the borrowing-cost picture across mortgages, auto loans, and credit cards is unlikely to ease soon — a backdrop that's also reshaping how savers think about where their cash earns interest.
Google and SpaceX explore launching data centers into orbit
The week's most futuristic story came from the AI infrastructure side. Google is engaging in discussions with SpaceX and other potential launch providers to advance Project Suncatcher, their research initiative to deploy artificial intelligence infrastructure in orbit, positioning Elon Musk's company as a natural candidate to launch the first prototypes.5 The conversation centers on launch services for Project Suncatcher, an effort Google announced as a research moonshot to one day scale machine learning in space late last year.6
The mechanics are unusual but coherent. The cloud and search giant ultimately aims to launch some 81 satellites spanning a 1km radius to create an in-orbit compute cluster, which will have Google's customer Tensor Processing Units (TPUs) on board. Google has partnered with satellite manufacturer Planet Labs to design and launch two prototype satellites by early 2027, serving as a proof-of-concept for a potential 81-satellite cluster that would beam workloads between satellites using free-space optical links. The appeal is unfiltered solar power, passive cooling in the vacuum of space, and freedom from the land, water, and electricity constraints that are starting to choke terrestrial sites.
The signal here matters more than the engineering. Last week, Anthropic signed an agreement with SpaceX to access Colossus 1, one of the world's largest and fastest-deployed AI supercomputers, planning to use the additional compute to directly improve capacity for Claude Pro and Claude Max subscribers, and expressed interest in partnering to develop multiple gigawatts of orbital AI compute capacity.7 When two AI competitors are independently planning orbital compute and a third is signing for gigawatts of it, the AI race has crossed into a phase where physical infrastructure, not model architecture, is the bottleneck.
What it means for savers
Three threads run through the week. Inflation is broadening beyond gasoline into shelter, airfares, and groceries, which means real purchasing power on idle cash is eroding faster than it has in nearly three years. A new Fed chair takes office under pressure to cut rates that the data does not justify cutting, which keeps Treasury yields elevated and borrowing expensive. And the largest companies in the index are now spending so aggressively on AI infrastructure that they are seriously considering orbit. For anyone holding cash through this period, the implication is that yield matters more than it has in years. The gap between accounts that pay something close to current rates and those that pay almost nothing will keep widening. Stablecoin-based savings products and other modern dollar accounts are one of the categories where that gap is most visible, in part because the rate environment is being repriced in real time on stablecoin rails rather than at the pace of a quarterly bank-rate review.