Stocks closed mostly higher yesterday with both the Nasdaq and S&P 500 making new all-time highs once again.

Middle East concerns continue after President Trump said "the ceasefire is on massive life support," and giving it "1% chance" of surviving.

Nonetheless, it does still survive. And investors yesterday looked past the stalled peace talks and ultimate fate of the ceasefire.

Yesterday's Producer Price Index (PPI) wholesale inflation report put that topic back on top of mind with inflation coming in hotter than expected. The headline numbers were up 1.4% m/m vs. last month's upwardly revised 0.7% pace (from 0.5%), and views for 0.5%, while the y/y rate climbed to 6.0% vs. last month's upwardly revised 4.3% (from 4.0%), and estimates for 4.8%. The core rate (ex-food & energy) was up 1.0% m/m vs. last month's upwardly revised 0.2% (from 0.1%), and forecast for 0.3%. The y/y rate came in at 5.2% vs. last month's 3.8% and the consensus for 4.3%.

Most of the increase can be traced back to higher energy prices. But services also played a part in April's higher-than-expected increase. It was not a pretty report. And it comes on the heels of Tuesday's CPI retail inflation report, which also came in higher than expected. But not by this magnitude.

But markets looked past this as well yesterday.

The key driver over the last several weeks has been a stellar earnings season with big-tech and AI-related names at the forefront posting big double-digit sales and earnings growth and upward guidance.

We saw more of that after the close yesterday when Cisco reported a positive EPS surprise of 1.92%, and a positive sales surprise of 1.70%. That translated to a quarterly EPS growth rate of 10.4% vs. this time last year, and a sales growth of 11.9%. They raised their quarterly EPS guidance by 8.33% above estimates (midpoint of $1.17 vs. $1.08), and quarterly sales by 6.19% above estimates (midpoint of $16.8B vs. $15.82B). And they raised their full-year EPS guidance, upping their FY'26 midpoint by 3.13% above their previous guidance ($4.28 vs. $4.15). And they raised their revenue guidance by 2.36% above their previous outlook ($62.9B vs. $61.45B). CEO Chuck Robbins cited AI demand for delivering their record results, and specifically noted "significant momentum and raised expectations for AI infrastructure from hyperscalers." They were up 2.60% in the regular session before earnings, and jumped another 18% in after-hours trade following earnings.

We'll get another 518 companies on deck to report earnings today, including another widely-held AI name, Applied Materials, reporting after the close.

In other news, President Trump landed in Beijing yesterday for talks with China's President Xi. He will be there for 3 days (May 13-15). Trade is the main focus. The U.S. wants China to open up its economy more to U.S. business. China is looking for concessions on tariffs and relief on other market access restrictions. President Trump was joined by many notable business leaders, including NVIDIA CEO Jensen Huang.

Additionally, there may also be talk of cooperation on getting the Strait of Hormuz opened. (China is a large purchaser of Iranian oil. And China is also a top exporter of manufactured goods to Iran.)

The market will be listening for any breakthroughs, or announcements or agreements.

In the meantime, the markets are at or near all-time highs. And the momentum is clearly in the markets favor.

See you tomorrow,