U.S. stocks' response to inflation surprises is, on average, robustly negative and shows pronounced time-series variability. Consistent with a view that stock prices respond to inflation surprises that affect the monetary policy stance, we document the largest stock market sensitivity during periods when inflation expectations and the output gap are running high. During these periods, firms with low net leverage, large market capitalization, high market beta, low book-to-market, and low markups are especially susceptible to inflation surprises.