Weekly Market Insight

What happened last week?

• AI enthusiasm and consumer resilience remained the key bullish themes last week, supported by continued positive AI-related headlines and broadly constructive commentary around consumer spending trends and labor market strength. Offsetting some of the optimism, focus increasingly shifted toward the continued backup in global bond yields, with concerns growing that inflation, fiscal deficits, and geopolitical pressures are becoming more structural headwinds for markets. (FactSet)
• Bulls highlighted expanding AI demand, CPU/share gain opportunities, robotics upside, and improving growth visibility, with few major concerns outside of some softer compute revenue commentary. (FactSet)
• War in Iran remains a wild card with massive amount of noise in recent days around possible diplomacy, but situation remains unclear and the fragile ceasefire is holding for now. Both sides have signaled that the gap has narrowed though broad divide remains over Iran's enriched uranium and desired Hormuz tolls. Despite shifting headlines, underlying fundamentals remain largely unchanged, with Strait traffic still restricted and SPR inventories continuing to buffer supply disruptions (though plunging global oil inventories is a growing worry). (FactSet)
• April FOMC minutes were largely in line with expectations with tone leaning hawkish as many participants pushed to remove the statement's easing bias altogether. Policymakers said elevated inflation and Middle East uncertainty could require rates staying restrictive for longer, with some warning energy and tariff pressures risk becoming more embedded. Most participants said tightening could be appropriate if inflation stays above target, while cuts would depend on clearer disinflation and easing geopolitical pressures. Labor market conditions were viewed as stable overall despite concerns that job growth remains concentrated in a few sectors. Fed funds pricing now anticipates more than 22 bp in rate hikes through year-end; FedWatch sees a 60%+ chance of a hike at the October meeting. (FactSet)
• Nothing narrative-changing form last week's economic data releases: 1) Jobless claims remained subdued; 2) Flash May PMIs showed manufacturing-services divergence while prices reached highest levels since summer 2022; 3) Consumer sentiment fell to a new record low in May amid cost of living concerns, though actual consumer spending has remained more resilient; 4) April housing starts and pending home sales both beat expectations and May builder confidence also beat though rates and affordability remain as housing market headwinds; 5) May Philly Fed Index lowest since Dec-25 with sharp declines in new orders and shipments, though prices also fell. (FactSet)