Market Commentary

For the week ending 5/15/2026

 

Though a Friday pullback neutralized most of the gains, the U.S. stock market achieved historic milestones last week, driven by some very powerful corporate earnings and an unrelenting wave of artificial intelligence (AI) optimism. On Thursday, the S&P 500 closed above 7,500 for the first time, while the Dow Jones Industrial Average surged back above the 50,000 threshold.

Despite that momentum, Wall Street ended the week mostly unchanged, partly due to some concerning inflation data and ongoing geopolitical anxieties

Prior to Friday, Wall Street experienced explosive growth, culminating in multiple record-setting sessions throughout the past week. Although the Dow has not set a new all-time high in a couple of months, it did close above 50,000 again last Thursday. In addition to exceptional momentum, the markets experienced welcome breadth. Apple, Nvidia, and Alphabet/Google also hit new all-time highs last week.

Corporate fundamentals remained remarkably strong, especially within the technology sector. Cisco Systems served as the primary earnings catalyst last week, with its stock leaping 13.4% in a single day Thursday, after beating Wall Street’s expectations and providing a massive surge in expected AI infrastructure orders from $5 billion to $9 billion. Earnings growth in general has largely exceeded expectations this quarter and provided the market with a major tailwind.

Geopolitical concerns continue to drag investor sentiment. On Sunday, May 10th President Trump called Iran’s latest peace proposal “totally unacceptable” and later said Iran ceasefire is “on life support.” Trump is now more seriously considering a resumption of major combat operations in Iran than he has in weeks. The Pentagon is considering conducting operations under a new “Operation Sledgehammer.”

Meanwhile, he and Chinese President Xi signaled shared interest in avoiding renewed trade-war escalation during their much-anticipated meeting in Beijing. Both leaders agreed that the Strait of Hormuz must open and that Iran should be prevented from having any nuclear weapons. Additionally, the White House reported that China will buy more oil from the U.S.

Inflation data came in hotter than expected with April headline CPI at 3.8% year over year, ahead of 3.7% consensus, and March at 3.3%, the highest it’s been in three years. April core CPI also came in high at 2.8% year over year, ahead of consensus 2.7%. Energy prices rose 3.8% month over month in April, extending March’s 10.9% surge and accounting for roughly 40% of the monthly increase in headline CPI amid ongoing Iran war-related pressure on oil and fuel prices. April headline PPI was up 6.0% year over year, hotter than 5.0% consensus, and the highest since Dec. 22. April core PPI was up 5.2% year over year, also above 4.3% consensus, and also the highest since Dec. 22. Despite this very concerning trend in inflation, markets seemed to brush off these reports, at least initially.

Retail continues to be one of the worst performing subsectors and has lagged the broader market during the big bounce over the last six weeks. Recent underperformance appeared to be due to a number of factors, including the national average gas price above $4.50 a gallon, more companies (including McDonald’s) warning about the hit to already pressured lower-income consumer cohorts, broader affordability pressures, and a pickup in headlines about AI-related job losses. April’s inflation reports showed that prices are outpacing wages for the first time in three years, erasing gains in real purchasing power. However, even with all those signs of caution from the consumer, headline April retail sales rose 0.5%, in-line with consensus expectations. April retail sales excluding autos rose 0.7%, above the 0.6% consensus. While higher sales at gas stations were expected due to the higher prices, the report also displayed higher sales in several other categories.

On May 13th, the U.S. Senate voted to confirm Kevin Warsh as the new Federal Reserve Chair. Former Chair Jerome Powell will step down to remain on the Fed Board of Governors, as Warsh takes over the role of Chairman. Warsh assumes leadership at a time when sticky inflation and a steady job market are rapidly diminishing the likelihood of near-term interest rate cuts. Reflecting this reality, major financial institutions pushed back their rate-cut expectations. Most now predict the Fed will maintain the current 3.5%–3.75% Fed Funds range through the end of the year.

In general, Wall Street shrugged off concerns on several fronts and, until Friday, all three major indices surged higher, with momentum in growth, technology, and semiconductor stocks continuing to drive the market to new highs.

For the week, the Dow dipped 0.2% to 49,526. The S&P 500 rose 0.1% to 7,409 and the Nasdaq closed down 0.1% to 26,225.

Oil jumped 10.5% to $105.42/bbl. Gold slid -3.6% to $4,562/oz, and the yield on the Ten-Year Treasury rose to 4.6%.

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