Good morning!

Risk-off after CPI. $GSPC -0.2%, $IXIC -0.7%, $DJI +0.1% Tuesday as investors digested an inflation print juiced by the Iran war and the blocked Strait of Hormuz.

1. The core is getting hotter

April CPI was the biggest annual jump in three years:

Headline: +0.6% m/m, +3.8% y/y (vs 3.7% expected)

Core: +2.8% y/y (vs 2.7% expected) even with energy stripped out

Markets repriced the Fed instantly. CME FedWatch now sees a 30% chance of a hike by year-end, up from 21% before the print. Energy drove it, but core proved sticky.

2. Shock after shock creates a new normal

Cleveland Fed's Beth Hammack asked the key question: "This is probably the fourth shock that we've had in five years. Is each one of these really independent?"

COVID, Russia-Ukraine, tariffs, now Iran. The Fed treats oil as temporary, but consumers have lived six straight years of price pain. For the incoming Warsh Fed, the risk is an inflationary mindset becoming embedded.

3. Wall Street feels echoes of 1999 - with a big difference

$S&P 500 is in the 7,300s and strategists are hiking targets. Ed Yardeni: "We've never seen consensus earnings expectations rise so quickly." He now sees $GSPC at 8,250 by year-end, up from 7,700.

The 1999 comparison? Not quite. Dot-com bubble median P/E was 152x. Today's AI basket trades around 39x, with real earnings revisions behind it, not just vibes.

4. Middle-class squeeze is back

For the first time in three years, inflation has officially eaten all wage gains. RSM's Joe Brusuelas put it bluntly: "We're not getting rate cuts this year, guys." The pain lands hardest on middle and working-class households, the classic K-shaped economy in action.

5. $EBAY won't dance with $GME

eBay rejected GameStop's $56B takeover bid, calling it "neither credible nor attractive." $EBAY is about 4x bigger than $GME, and the board backed its current CEO. Nice lawyer burn, no deal.

On the radar

$HIMS sinks after Q1 loss and sales miss

$WEN has a billionaire circling its struggling business

$MU helped push the Roundhill Memory ETF $DRAM to $6.5B AUM, fastest ever

Household debt hits new high, but credit card balances dip

Senate confirms Kevin Warsh to Fed board, chair vote next

Coffee inflation still rising, $BROS (Dutch Bros) eating most of the cost

Goolsbee: "disappointed" by inflation read

Altman vs Musk drama continues in court testimony

What we're watching today

Trump's Beijing trip with Hormuz, AI, and tariffs in focus. Trump says Iran ceasefire is on "life support." On data: PPI wholesale inflation hits this morning to confirm yesterday's CPI story.

Earnings to watch:

Today: $CSCO, $BABA, $USAR, $BIRK, $MFC, $NBIS, $TSEM, $DT, $KEP, $TAK

Thu: $AMAT, $NU, $HMC, $LI, $FIG, $DDS, $KLAR, $BN, $NGG, $VIK

Fri: $MFG, $RBC, $SGML

Bottom line: inflation is re-accelerating, breadth is thin, and the Fed is moving from cuts to maybe hikes. Trade the earnings, watch PPI, and keep an eye on oil with Hormuz in play.