05/19/2026
Recapping Last Week
Stocks hit highs, then pulled back: S&P 500 and Nasdaq rose early in the week on AI/semiconductor strength but weakened later as yields rose and inflation concerns returned.
Tech-led, narrow leadership: Gains remained concentrated in AI-driven, high-growth tech; these stocks showed sensitivity to rising interest rates.
Yields surged: Treasuries sold off across maturities, with key levels approached or breached: ~4% (2-year), ~4.5% (10-year), and ~5% (30-year, first time since last summer).
Inflation surprised higher: CPI (~3.8% YoY) and PPI (~6% YoY) came in hot, shifting expectations away from rate cuts.
Rate outlook repriced hawkishly:
• Near-term (June meeting): probability of a cut dropped from 5% to 0.8%; strong expectation of holding steady.
• Year-end: ~50% chance no change, ~40% chance of a 25 bp hike, ~10% chance of a 50 bp hike.
Dollar strengthened: Modest gains early, then a sharp rise Friday as markets priced in higher-for-longer rates.
Oil remained firm: Around $100/barrel (July contract), with strong backwardation (near-term prices higher than later contracts).
Geopolitics steady but fragile: Iran cease-fire held, likely to avoid disruption during U.S.–China summit rather than signal lasting progress.
Precious metals fell late-week: Despite earlier stability, silver dropped sharply (~10%) during Friday’s risk-off move.
U.S.–China summit underwhelmed: Limited tangible outcomes despite high-level attendance (CEOs representing >20% of S&P 500 market cap).
Select deal headlines:
• Nvidia reportedly approved to sell second-tier H200 chips to Chinese firms (lukewarm response).
• China committed to purchase 200 Boeing jets (potentially up to 750 longer-term).
Trade policy signal: U.S. considering dropping tariffs on low-value consumer goods with limited domestic production relevance.
China’s priority: Attempted to influence U.S. policy stance on Taiwan (“strategic ambiguity”).
The Week Ahead
Fed leadership in focus: New Fed Chair Warsh faces pressure to cut rates despite markets shifting toward pricing hikes.
Policy debate: Key question is whether AI-driven productivity gains could offset inflation—or if rate hikes are inappropriate for a short-term, energy-driven supply shock.
PMIs as key catalyst: Global preliminary PMI data (U.S., Germany, Eurozone, U.K.) will guide expectations for growth vs. input-cost pressures.
Light U.S. data calendar: Few major domestic economic releases outside of PMIs.
International data highlights:
• Canada & U.K. CPI (impact of rising energy prices)
• Australia unemployment data (Thursday)
Geopolitical focus returns to Iran: Diplomatic progress on reopening the Strait of Hormuz remains stalled, adding uncertainty to energy markets.
Bond market pressure: Yields near 1-year highs raise risk of “bond vigilantes” influencing policy early in Warsh’s tenure.
SpaceX IPO watch:
• Prospectus could be filed soon (starting 20-day quiet period)
• Target valuation ~$1.25T; offering size ~$70–75B
• Potential major Nasdaq 100 addition (~3.5% weight), requiring significant ETF buying (~$16B from QQQ alone)
Market structure impact: IPO demand could materially affect flows due to size vs. public float.
Historic ticker change: Bank of New York (founded 1784) will change ticker from BK to BNY, marking a notable legacy milestone.
Recapping Last WeekStocks hit highs, then pulled back: S&P 500 an...
