ORLANDO, Florida, May 28 (Reuters) - The S&P 500 and

Nasdaqforged new record highs on Thursday, and the dollar and

Treasury yields fell after the U.S. and Iran agreed to extend

their ceasefire, while investors also digested the latest U.S.

inflation and revised economic growth figures.

In my column today, I look at the wedge between core PCE and

CPI inflation in the U.S., a rare phenomenon but one that is

likely to become more entrenched in the coming months. This

would be a potential headache for new Fed Chairman Kevin Warsh.

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 first-quarter GDP growth revised lower to 1.6%

pace

2. US inflation firming as Iran war drives up prices

3. Trump Fed pivot raises dollar-policy doubts too: Mike

Dolan

4. Anthropic secures $965 billion valuation after

raising $65 billion

5. EXCLUSIVE-China works on AI token futures market,

sources say, in race with US

Today's Key Market Moves

* STOCKS: Key benchmarks in Asia, Europe, UK all down by

as much as 1%. US-Iran truce extension lifts Wall Street. In the

last two months, S&P 500 is up 20%, Nasdaq up 30%.

* SECTORS/SHARES: Six S&P 500 sectors fall, five rise.

Tech +1.3%, utilities -1.1%. Dell +19% after results, Dollar

Tree ( DLTR ) +18%, Agilent ( A ) +17%, Best Buy ( BBY ) +16%. Synopsys -9%.

* FX: Dollar -0.2%, pulling USD/JPY further back from

160.00. NZD again biggest G10 climber, ZAR biggest EM gainer.

* BONDS: Treasury yields fall as much as 3 bps, U.S.

curve bull flattens.

* COMMODITIES/METALS: Oil hits 6-week low, gold +1%.

Today's Talking Points

* Stagflation

Key U.S. economic data on Thursday neatly encapsulated where

the world's largest economy is right now -- accelerating

inflation and soft growth. Policymakers and consumers are right

to be concerned, and talk of "stagflation" will percolate.

Prices are expected to continue rising, lifted by the AI

capex boom and energy shock. AI spending may support growth, as

will the "wealth effect" from high asset prices. But it's no

guarantee, and if growth and employment turn lower, the Fed will

be in a bind.

* Exiled on Main Street

Zooming out, Thursday's data highlighted the contrasting

fortunes between businesses and consumers. Corporate profit

growth slowed in Q1 but profitability remained near record

highs, while the savings rate in April fell to just 2.6%. It has

been lower in only one month in the past 18 years.

In crude terms, Wall Street has rarely been in better shape,

while Main Street is struggling to keep its head above water.

How sustainable is this? Cue renewed debate over the 'K-shaped'

economy, wealth taxes, capital vs labor, and inequality.

* AI smokescreen?

The AI boom continues to inspire intense debate. Behind

record-high stock markets, there is deep skepticism among many

investors that the trillions of dollars of AI capex will be

matched by sufficient demand, which will lead to huge

over-spending and over-capacity.

Microsoft ( MSFT ) is cutting internal Claude code licenses because

they are too expensive, Uber ( UBER ) has already burned through its 2026

AI coding budget, and there are much cheaper alternatives coming

out of Asia. Few people doubt AI's transformative power. But has

too much investment been brought forward too soon?

What could move markets tomorrow?

* Developments in the Middle East

* Japan retail sales (April)

* Japan industrial production (April)

* Japan Tokyo CPI inflation (May)

* Taiwan GDP (Q1, revised)

* European Central Bank board member Fabio Panetta speaks

* Germany CPI inflation (May, prelim)

* Bank of Canada publishes summary of discussion at May

policy meeting

* Canada GDP (Q1)

* Brazil GDP (Q1)

* U.S. Chicago PMI (May)

* U.S. trade (April)

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

Minneapolis Fed President Neel Kashkari, San Francisco Fed

President Mary Daly, and Philadelphia Fed President Anna Paulson

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