Here is Schwab's early look at the markets for Thursday, May 14.

Kevin Warsh, expected to become Federal Reserve chairman when Chairman Jerome Powell's term ends tomorrow, got an unfriendly welcome from this week's inflation data. Stocks remain near record highs, but concern is building that the Fed might have to hike rates, eventually, to deal with quickly rising prices.

Today features possible news out of China as President Trump meets with President Xi. He brought along a large group of U.S. executives from across industries, making it possible that some could have announcements about business deals. The second part of the double feature is April U.S. retail sales data due at 8:30 a.m. ET.

Though headlines from Beijing about that and any signs of progress in discussion about the war might influence stocks today, the market remains under a cloud thanks to the inflation news. High energy prices appear to be leaking into the broader economy rather quickly as the oil spike continues.

U.S. wholesale prices skyrocketed in April far above consensus estimates, Wednesday's Producer Price Index, or PPI, showed. Monthly PPI, which measures prices at the wholesale level, rose 1.4% and core-- excluding food and energy—surged 1%. Analysts had expected 0.4% and 0.3%.

"The hot PPI data is sending yields sharply higher," said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research, or SCFR. "The headline number was bad, but stripping out energy costs still shows that there's inflation in the pipeline."

Some of the inflationary metrics in PPI were in parts of the report that affect the Personal Consumption Expenditures (PCE) price index, known to be the Fed's favored inflation report. April PCE comes out later this month.

Digging deeper into Wednesday's data, annual headline PPI rose 6%, the worst since December 2022. And the government made slight upward revisions to March PPI. Some areas where April core PPI rose included home health and nursing home care, along with domestic air travel up 3% month over month.

"The concern is that we've already seen an increase in prices broadly and this suggests that there may be more pain to come," Howard said.

The ugly PPI report came after Tuesday's April Consumer Price Index, or CPI, exceeded expectations, though not by nearly as much as PPI. However, inflation often shows up first at the wholesale level, putting pressure on companies to either raise prices they charge customers or eat the higher costs and take a margin hit. It's a choice they likely don't relish.

Treasury yields stayed roughly in their lane Wednesday despite PPI, rising just two basis points to 4.48% for the 10-year note as market participants anticipated Thursday's Trump meeting with Xi.

After PPI, chances of the Fed cutting rates this year fell to 1%, according to the CME FedWatch Tool. Chances of a hike, however, now sit near 35%, up from 23% before the disappointing inflation news.

When retail sales bow, it's important to remember they don't adjust for inflation. The Briefing.com consensus is 0.4%, down from 1.7% in March. That March number looks incredibly strong but mostly reflects a 15.5% increase in gas prices from February. Excluding gas prices, retail sales rose 0.6% in March. If numbers surge past expectations, it might be more a function of rising prices than rising demand.

Weekly initial jobless claims data also bow early today, and have been well under historic levels, near 200,000. More of the same is expected, and even if there's a leap in any one week, it would take several bad numbers in a row to indicate a trend. Recent layoffs in the tech industry could eventually filter into these reports.

Beyond data, the chip market got a lift yesterday on news that Nvidia CEO Jensen Huang was on the attendee list for Trump's trip to China. He'd been left off initially. Even so, it seems unlikely the U.S. would be willing to move much on export controls banning advanced chips from China. The question is whether China might relax its policy keeping more basic Nvidia chips off that market.

"President Trump’s China visit is expected to keep the peace on the trade war," said Michelle Gibley, director of international equity research and strategy at SCFR. "The number of U.S. CEOs traveling with Trump indicates a desire by the US to reach purchase agreements and opening of China’s market. In exchange, China may want access to US technology."

A trade truce between the two countries is in effect until November.

The war could be up for discussion as well, though it's unclear how much influence Xi has to push warring parties back from their stalemate despite China's close trading relationship with Iran. Earlier this week, Trump said he was considering new combat in Iran as the Strait of Hormuz remains closed amid the tenuous ceasefire.

Checking earnings in a light week, Cisco reported earnings after Wednesday's close and shares initially popped more than 10% in post-market trading as both earnings and revenue topped expectations. Product orders rose 35% annually, and guidance also easily surpassed FactSet consensus. Though the call hadn't taken place as of publication time, barring any disappointments there, Cisco might give tech another boost today. One minor quibble some investors might have is a drop in gross margin from a year earlier.

Applied Materials, a semiconductor equipment maker, reports after the close today. Analysts have recently raised their expectations for the company's results. Last time out, shares jumped double digits on earnings and revenue that topped Wall Street's expectations.

Major indexes mostly shook off Wednesday's PPI report, posting solid gains as chip and AI-related stocks kept flourishing. Both the Nasdaq Composite and the S&P 500 Index posted new record highs Wednesday, and volatility eased after a small rally earlier this week.

However, the index strength belied a weaker trend below the surface. By late Wednesday, the S&P 500 was up 0.7% despite more than 300 of its components declining.

Chips and technology continue to see money flowing in amid bullish momentum but could face a series of challenges over the next few weeks. The first is if Trump's meeting with Xi doesn't yield any meaningful progress with Iran. Then there's Nvidia's earnings next week, which could spark a sell on the news reaction regardless of what the company reports, said Nathan Peterson, director of derivatives research and strategy at SCFR.

"Then if we don't get a healthy consolidation period from those two catalysts, June seasonality is not bullish, and mid-terms and the incoming new Fed chair could generate some volatility," Peterson said.

This has been a narrow, AI-led rally, with consumer discretionary stocks rolling over in the past two weeks. One way to consider monitoring the rally for signs of a healthier, broadening trend is to watch the S&P 500 Equal Weight Index, which weighs all components the same rather than by market capitalization. It fell on Wednesday by about 0.4% and has been trending lower since peaking last week near 8,300. That point remains resistance. A push above that might suggest broadening trends.

The rally remained narrow Wednesday with communication services and info tech way in the lead. Still, six of 11 S&P 500 sectors climbed, a better performance than earlier this week. Rate-sensitive sectors like utilities and real estate suffered.

Still, market breadth looks tepid with only 45% of S&P 500 stocks trading above their 50-day moving average. This is historically light for the average being at record highs and only happened once in history—from 1998 to early 2000 during the internet boom.

Among individual movers Wednesday, Alibaba recovered from early weakness to climb 8% despite missing analysts' quarterly revenue expectations. Profitability dropped as the company spent heavily on tech, but cloud growth accelerated.

Memory chip stocks—on a roll recently amid shortages and rising product prices—surged Wednesday after dropping Tuesday in what might have been profit taking. Micron led with 5% gains.

Magnificent Seven stocks had a strong day Wednesday, led by nearly 4% gains at Alphabet and a 2.7% rally for Tesla. But software stocks lost ground and some restaurant, home building, and sporting goods stocks appeared hurt by rising yields and PPI.

Marvell Technology climbed 8%, boosted by news that Advanced Micro Devices bought shares of the company and Bank of America raising its price target on Marvell based on a strong AI networking forecast.

Lumentum climbed another 3% after Monday's double-digit gains after getting added to the Nasdaq-100®, which contains the largest 100 non-tech stocks in the Nasdaq. Its addition means mutual funds that track the index need to buy shares.

Ford shares accelerated 13% in response to a positive analyst note from Morgan Stanley saying Ford's relationship with Chinese battery maker Contemporary Amperex Technology could be "a strategic competitive advantage for its energy storage business." Even with Wednesday's gains, shares of Ford are below their February highs amid pressure from tariffs and high oil prices.

The Dow Jones Industrial Average® ($DJI) slipped 67.36 points Wednesday (-0.14%) to 49,693.20; the S&P 500 Index (SPX) gained 43.29 points (+0.58%) to 7,444.25, and the Nasdaq Composite® ($COMP) climbed 314.14 points (1.20%) to 26,402.34.