Wall Street Sets Records as AI Optimism Overrides 3.3 Percent Inflation

United States stocks finished the week at record highs. The Dow Jones Industrial Average, an index of 30 large American companies, held above 51,000 for the first time, and the technology-weighted Nasdaq Composite gained roughly 8 percent during May. The advance was driven by strong technology earnings and optimism about artificial-intelligence growth, led by Dell Technologies, whose shares rose about 33 percent after the computer maker raised its forecast on demand for the servers used to train artificial-intelligence systems.

Investors also watched Washington, where the prospect of a deal to extend the ceasefire between the United States and Iran supported the prices of oil-sensitive assets. President Trump said he was seeking an agreement that guarantees unrestricted traffic through the Strait of Hormuz, the shipping channel that carries roughly a fifth of the world's seaborne crude oil.

The gains are notable because they came alongside data showing that inflation is not retreating. Core prices, which exclude volatile food and energy costs, rose 3.3 percent over the year in April, up from 3.2 percent in March. The overall figure from the inflation gauge the Federal Reserve watches most closely (the Personal Consumption Expenditures price index, or PCE) climbed to 3.8 percent. Those readings sit well above the Federal Reserve's 2 percent target, and there is broad agreement that they give the central bank no reason to cut interest rates soon.

In Britain, Andrew Bailey, the governor of the Bank of England and the official who leads the country's central bank, warned that rate cuts can come only when policymakers are much more confident that inflation is contained. He added that even a Middle East ceasefire would still leave significant uncertainty about energy prices.

The same dynamic is familiar to those who favor sound money. Asset prices are setting records while the dollar continues to lose roughly 3 percent of its purchasing power each year, and the gains are concentrated in a small number of technology firms financed by years of cheap credit. When the cost of borrowing stays below the rate at which prices rise, money tends to move toward speculative investments rather than productive savings, a pattern that has often preceded sharp market declines.