SOTS 2nd Hour: Another Hot Inflation Print, Healthcare's FDA Question, & U.S.-China Summit Latest 5/13/26

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Sara Eisen (1:06)

Good Wednesday morning. Welcome to Squawk on the Street. I'm Sara Eisen with Carl Quintanilla. We are live as always from Post 9 of the New York Stock Exchange. David Faber's on assignment. Coming up this hour, President Trump arriving in China early this morning with a key update to his guest list on the trip. We've got the latest from Beijing in just a moment. Plus big jumps for some AI stocks after a cool down yesterday, including Cloudfirm Nebius, Chipmaker Wolfspeed. We're gonna look at what's driving the action ahead, and we will talk about the major change at the top of the FDA. Look at that could mean for health care stocks, which have all been under pressure this year.

But first, Carl, we have to start with inflation, because we got another update this morning. PPI, producer price inflation. This is what goes in at the wholesale level, so it ultimately does factor into consumer prices. And it was hot, hot, hot. I mean, the biggest gain since December 2022, a 6% surge from a year ago. Yes, we expected a hot reading because of oil prices and energy prices, but it definitely went farther than most economists were expecting. Even if you look at core, which is X food and energy, which tries to strip out what's volatile, we saw higher price. I mean, the month over month PPI core was about 1% compared to 0.3% consensus, and it rose 5.2% year over year. So this is one that the Fed will not be able to ignore, and it follows yesterday's consumer price inflation, which was also higher than expected. And I know you've been talking about this, but I just wanted to put it in chart form, which is so CPI inflation is blue, average hourly earnings, which is wages are in orange. And what we saw in yesterday's report, which is really not great news, is that for the first time since 2023, the blue line went above the orange line. In other words, inflation outstripping wages. That's something, you know, I've been saying for the last few months really, that there's been so much progress on inflation. Well, we're really starting to go the other way. And the question is just how much of that is temporary. Yes, we've seen the oil surge, and we've seen it trickle down into places like services, you know, transportation, freight is a really good example. That all becomes more expensive. Airfares, for instance, it becomes more expensive because it's impacted by the conflict in oil prices. Is it a temporary phenomenon?

Or is it going to last longer with sort of no end in sight? That's why we're watching things like the five-year forward inflation expectations, which are higher. And that's what the Fed watches as well. It's going to be tough going in for Kevin Warsh, assuming he gets confirmed later today, which we do by the Senate, and begins to preside over the next Fed meeting.

Carl Quintanilla (3:42)

I know. I know you were talking about airfares as part of all this. That was an eye-popping print, up 20%, almost 21% yesterday in CPI. And then food at home, again, one of the biggest monthly jumps we've seen. And I know you're tracking ground beef. Is it $7?

Sara Eisen (3:56)

Yeah, look at the beef prices. When you feel this, when you go to the grocery, or when you go to McDonald's, or, you know, they all talk about this as well. All the fast food companies, the Shake Shacks. This is what, it just is a long-term, longer-term, last few years of what's happened with beef prices. And the spikes just have gotten a little bit more intense there. I also wanted to note from yesterday's consumer price index shelter, because that's such a big part of it. And a lot of economists say that completely distorts it. It had been tame or taming in the right direction. But in this latest report, we did see a big spike up in shelter again. Not sure how sustainable that is. And that's why maybe the overall equity market has been resilient in the face of these inflation risks and the bond yields, too. Yes, bond yields are higher, but we're not talking about anything extreme, because there are questions about how long-lasting ultimately this will be. But, you know, there's no question that Americans are feeling it in more places than just at the gas pump.