Dear readers,
Yesterday we told you the equity market’s composure rested on a bet that demanded near-perfect execution from policymakers, corporations, and geopolitics simultaneously. This morning, one leg of that bet snapped clean off.
Zero point seven percent. That was the February Producer Price Index print the Bureau of Labor Statistics delivered at 8:30 AM—more than double the 0.3% economists had penciled in. The annual wholesale inflation rate now stands at 3.4%, its highest reading since February 2025, and the timing could not be worse. As Jerome Powell and the FOMC prepare to announce their rate decision at 2:00 PM ET, they confront an economy shedding 92,000 jobs in a single month while inflation accelerates at a pace that makes easing impossible. The stagflation whisper we flagged last week is no longer a whisper.
Here is what is driving markets this afternoon—and what to watch when Powell takes the podium.
The Fed’s Impossible Arithmetic
The rate decision itself is settled: the benchmark stays at 3.50%–3.75%, exactly where the CME FedWatch tool pointed yesterday. But the decision was never the story. The story is the systematic destruction of every rate-cut expectation investors had built into 2026.
The arithmetic is punishing. Brent crude has climbed to $109 a barrel, up more than 40% since Operation Epic Fury launched on February 28 and Israeli strikes hit Iran’s South Pars gas field. WTI has pushed past $97. Average US gasoline prices have surged 81 cents to $3.84 a gallon—a tax on consumption that no fiscal stimulus can offset quickly. President Trump’s emergency 60-day suspension of the Jones Act to ease domestic shipping bottlenecks is an acknowledgment that the energy crisis has metastasized beyond the oil market itself.
Yesterday we noted that Q4 2025 GDP growth had been revised down to an anemic 0.7%. Pair that with this morning’s PPI shock and you have the textbook definition of a central bank with no viable move: cut into 3.4% wholesale inflation and you pour gasoline on prices; hold or hike into a contracting labor market and you accelerate the downturn. The updated Dot Plot, due alongside the decision, will reveal how many FOMC members have quietly abandoned the easing path. With Powell’s term expiring May 15 and Kevin Warsh waiting in the wings, this afternoon’s press conference carries weight that extends well beyond a single meeting.
Nvidia Gets Back Into China—at a Brutal Cost
While the macro picture darkens, the AI trade is writing its own chapter of geopolitical compromise. Nvidia CEO Jensen Huang confirmed that the company has secured a US license to resume production and sales of its H200 chips to Chinese buyers, ending a roughly ten-month supply freeze.
The price of admission is steep. A full 25% of sales revenue flows directly to the US government under the agreement’s terms, and the chips still face 25% Chinese import tariffs plus uncertain customs approvals on the other side. Bernstein Research projects that Nvidia’s share of the Chinese AI chip market will collapse from 39% in 2025 to 8% by the end of 2026, as Huawei and domestic competitors entrench themselves in the vacuum Nvidia was forced to leave.
Wall Street, characteristically, is looking past the China erosion. Truist Securities raised its price target on the stock to $287 this week, anchoring the bull case to the sheer scale of global datacenter construction—a demand curve that, for now, dwarfs whatever revenue Nvidia forfeits in Beijing. The question is whether the AI infrastructure thesis we discussed yesterday—Jensen Huang’s $1 trillion addressable market by 2027—can keep absorbing geopolitical friction at this rate.
Bitcoin’s Narrative Whiplash
Yesterday we described Bitcoin’s audition as a crisis-era store of value. The audition continues, but the reviews are mixed.
When the Middle East conflict escalated in late February, Bitcoin initially cratered alongside equities, erasing $128 billion in crypto market capitalization. Then institutional buyers stepped in—$1.2 billion in ETF and corporate strategy inflows this month alone—driving BTC to nearly $76,000 on Tuesday, sharply outperforming physical gold over the same stretch. That was the haven narrative in full bloom.
This morning’s PPI print killed the mood. Bitcoin shed roughly $2,000, retreating to the $72,300 level as traders repriced the likelihood of prolonged restrictive monetary policy. Citigroup piled on, cutting its 12-month Bitcoin target from $143,000 to $112,000 and citing stalled US crypto legislation as a bottleneck for broader institutional adoption. The pattern is clarifying: Bitcoin behaves like a risk asset when macro data deteriorates and like a haven when geopolitical fear is the dominant force. It cannot yet do both at once, and days like today expose that limitation.
General Mills and the Breaking Point of Pricing Power
For a ground-level view of what 3.4% wholesale inflation and $3.84 gasoline mean for American households, consider General Mills’ fiscal Q3 2026 earnings, reported this morning. The numbers are bleak.
Adjusted EPS came in at $0.64, missing the $0.73 consensus by a wide margin. Revenue fell 8% year-over-year to $4.4 billion. Management confirmed what the data already suggested: consumers are aggressively trading down to private-label alternatives as energy costs and broader inflation squeeze household budgets past the point of brand loyalty. The company reaffirmed full-year guidance calling for a 16% to 20% decline in adjusted profits—a forecast that amounts to an admission that pricing power, the corporate weapon of choice during the 2022–2024 inflation cycle, has reached its structural limit.
SAP Bets on Consumption-Based AI Pricing
In enterprise software, SAP announced a structural pivot that may preview where the industry is headed. Starting in July, the company will deploy dedicated “Forward Deployed Engineering” teams to build bespoke AI applications for clients, billing based on actual AI consumption rather than traditional flat-rate subscriptions. It is a bet that enterprises under budget pressure—and in this macro environment, that means nearly all of them—will pay for measurable AI output rather than commit to fixed licensing fees. If the model works, expect every major software vendor to study it closely.
The Takeaway
Yesterday we wrote that the equity market’s thesis required a resolution to the Hormuz crisis, continued semiconductor momentum, and a Fed that neither tightened into weakness nor loosened into inflation. This morning’s PPI print has made the Fed’s half of that equation materially harder. The physical constraints—blocked shipping lanes, surging crude, fractured supply chains—are now pricing into wholesale goods at a pace that leaves policymakers with diminishing room to maneuver.
Powell’s press conference this afternoon is not about the rate decision. It is about whether the Fed chair can articulate a credible framework for an economy where energy shocks are dictating the inflation trajectory and the labor market is deteriorating simultaneously. The 10-year Treasury yield and the shape of the Dot Plot will tell us within minutes whether institutional conviction holds or fractures.
We will be watching. You should be too.
Best regards,
The StocksToday.com Editorial
