ORLANDO, Florida, May 12 (Reuters) - The S&P 500 and

Nasdaq fell on Tuesday, dragged down by a sharp decline in

semiconductors, while sentiment was also rattled by rebounding

oil prices and stronger-than-expected U.S. inflation which both

lifted bond yields.

In my column today, I look at the case for U.S. rate cuts

this year. Rates traders have removed all easing bets and most

economists have too, but some are still holding out. Here's

their argument.

If you have more time to read, here are a few articles I

recommend to help you make sense of what happened in markets

today.

1. US consumer prices increase further in April

2. Hopes fade for Iran peace deal as Trump says

ceasefire on 'life support'

3. Investors say they want Trump and Xi to stay out of

AI's way

4. US, Japan agree excess FX volatility undesirable,

Bessent says

5. Warsh's red lines worry world finance: Mike Dolan

Today's Key Market Moves

* STOCKS: Japan up but Asia ex-Japan down, KOSPI ends

-2% after wild rollercoaster ride. Europe in the red. S&P 500

-0.2%, Nasdaq -0.7%. Dow inches higher.

* SECTORS/SHARES: Four S&P 500 sectors down, seven rise.

Tech -1%, healthcare +2%. Qualcomm -11.5%. Intel -7%, SOX index

-3%. UnitedHealth +3%.

* FX: Dollar rises broadly. Sterling -0.5%, Korean won

-1%.

* BONDS: UK 30-year yield highest since 1998. U.S.

yields +5 bps across the curve, 10-year auction is soft - big

tail, low bid/cover.

* COMMODITIES/METALS: Oil rises, WTI +4% back above

$100/bbl.

Today's Talking Points

* 4, and core?

Headline annual U.S. CPI inflation rose to 3.8% in April,

higher than expected and the highest in three years. This means

real wage growth has turned negative for the first time since

2023 also. It looks like 4% - double the Fed's target - will be

hit soon, perhaps next month.

This is bad news for President Donald Trump, whose approval

ratings are already low. For Fed officials, the key issue is

whether this spills into core inflation. CIBC economists say

this has begun, Morgan Stanley says passthrough remains limited.

* Keir pressure

If the U.S.-Iran ceasefire is on 'life support', so too is

UK leader Keir Starmer's prime ministership. After the ruling

Labour Party suffering bruising defeats in local and devolved

national elections last week, Starmer is defying calls to quit.

But the calls, from within his own party, are getting louder.

Wary that any successor may increase borrowing and spending,

long-term UK bond yields have surged to the highest since 1998,

and sterling is the biggest decliner among major currencies on

Tuesday. The pressure, political and market, is building.

* When the chips are down

Chip stocks slumped on Tuesday, with the Philadelphia

Semiconductor index down as much as 6% before halving those

losses by the close of play. What triggered it? Maybe pure froth

- it was up 70% in six weeks - and South Korea's KOSPI's wild

rollercoaster ride on Tuesday.

Meanwhile, AI giant Anthropic updated rules surrounding the

buying and transfer of its shares, raising some doubt around

ownership rights once the firm goes public. "Any sale or

transfer of Anthropic stock, or any interest in Anthropic stock,

that has not been approved by our Board of Directors is void and

will not be recognized on our books and records."

What could move markets tomorrow?

* Developments in the Middle East

* Energy market moves

* U.S. President Donald Trump arrives in Beijing for summit

with China's President Xi Jinping

* China's Tencent and Alibaba reports earnings

* Australia wage growth (Q1)

* Japan earnings including Nissan, Sumitomo Mitsui and

Softbank

* Japan trade, current account (March)

* Germany wholesale inflation (April)

* European Central Bank officials scheduled to speak include

President Christine Lagarde, board member Philip Lane,

supervisor Claudia Buch and Olli Rehn

* Euro zone GDP (Q1, flash)

* Euro zone industrial production (March)

* Bank of England's Catherine Mann speaks

* U.S. Treasury sells $25 billion of 30-year notes at

auction

* U.S. producer price inflation (April)

* U.S. Federal Reserve officials scheduled to speak include

Boston Fed President Susan Collins, Minneapolis Fed President

Neel Kashkari and Dallas Fed President Lorie Logan

* U.S. earnings include Cisco

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