Import Prices Near 8% Test AI Stocks' Rally as Treasury Curve Flattens

Import prices matter because they feed directly into the cost of goods that businesses buy from abroad. When import prices rise at an 8% annual pace, companies face higher input costs, and those costs can eventually pass through to consumer prices. That keeps pressure on the Fed to hold short-dated rates higher for longer, which in turn lifts the yields that compete with equities for capital. A flattening 2-10 curve — meaning short-term yields rise relative to long-term yields — is the bond market's way of registering that policy stays tight even as growth expectations soften.

The currency channel follows from the rate structure. ING's framework holds that when the Fed is applying the brakes while growth prospects are being revised down, the dollar tends to strengthen against activity and emerging-market currencies. The dollar only turns lower when short-end rates break lower — and ING states that has not happened yet. For equity investors, that means the bar stays high for AI and other long-duration growth shares: their valuations depend on discount rates that remain elevated as long as inflation surprises keep coming in above expectations.