Bond Rout Cools, Iran Peace Progress, and an Eighth Weekly Win

U.S. equities extended their rally to eight consecutive weekly gains - the longest streak since 2023 - despite an early-week bond market scare. The S&P 500 added +0.88% to a record close of 7,473.47, the Dow Jones Industrial Average jumped +2.13% to a record 50,579.70, and the Nasdaq Composite gained +0.45% to 26,343.97. The big surprise was leadership rotation: the Russell 2000 rocketed +2.72% to 2,869.23 and the NYSE Composite added +1.44% as cyclical and small-cap names took back the baton from mega-cap tech. Friday alone saw the Dow add 294 points heading into the Memorial Day holiday weekend, with Health Care (+1.19%) and Technology (+1.02%) leading every S&P sector except Communications.

The week began ugly. On Monday and Tuesday, Treasurys sold off hard as digesting the prior week's hot CPI (3.8% YoY) and PPI (+1.4% MoM) reports collided with renewed Iran-war anxiety. The 30-year Treasury yield briefly hit 5.197% on Tuesday - its highest level since July 2007 - and the 10-year touched 4.667%. The Dow fell 322 points and the Nasdaq lost 0.84% on Monday alone. Then sentiment turned: President Trump announced Monday he had postponed a "scheduled attack of Iran" at the request of Qatar, Saudi Arabia, and the UAE, with mediated U.S.-Iran talks via Oman gaining momentum throughout the week. Reports of a potential framework deal - including a moratorium on Iranian nuclear enrichment in exchange for sanctions relief and Strait of Hormuz access - pulled WTI crude down 7.2% on the week to $96.60, dragged Brent under $104, and pushed the 10-year yield back to 4.56% by Friday: actually 3 basis points LOWER than the prior week's close.

Nvidia Crushes It, Target Surprises, Walmart Disappoints

Earnings season delivered a split decision on consumer health. Nvidia (Tuesday after-hours) reported record revenue of $81.6 billion for Q1 FY27 (up 85% YoY), Data Center revenue of $75.2 billion (+92% YoY), and announced an $80 billion share repurchase authorization plus a dividend hike from $0.01 to $0.25. EPS of $1.87 beat the $1.76 consensus. Target (Wednesday) stunned the Street with comparable sales up +5.6% (vs. +2.4% expected), traffic +4.4%, digital +8.9%, and adjusted EPS of $1.71 (vs. $1.47 expected) - CEO Brian Cornell described "broad-based" consumer strength. Walmart (Thursday), however, sold off -6.8% intraday after merely meeting revenue at $175.7B and guiding next-quarter revenue to $185.4B, about 0.5% below consensus. The takeaway: the upper-middle income consumer (Target) is holding up better than the low-end (Walmart) under hot inflation.

Warsh Sworn In, FOMC Minutes Stay Cautious

Kevin Warsh was sworn in as the 17th Chair of the Federal Reserve on Friday, May 22, in a brief Oval Office ceremony with President Trump. In his opening remarks, Warsh pledged to "lead a reform-oriented Federal Reserve" focused on the dual mandate of price stability and maximum employment. The April 28-29 FOMC minutes (released Wednesday at 2 PM ET) showed the Committee unanimously concerned about "elevated" inflation tied to the Middle East energy shock, with several participants explicitly entertaining the possibility that rate HIKES, not cuts, could become appropriate if inflation expectations begin to drift. Markets continue to price the next FOMC move (June 16-17) as overwhelmingly likely to be a hold, with the bond market quietly removing all 2026 rate-cut probability.

S&P Flash PMI: A Split Economy

Thursday's S&P Global flash PMIs for May showed a sharply diverging economy. Manufacturing PMI surged to 55.3 (vs. 53.8 expected, prior 54.5) - the strongest since May 2022 - on tariff-related front-loading and energy-sector demand. But the Services PMI slipped to 50.9 (vs. 51.1 expected), with growth nearly stalling over the past three months as the Iran war and elevated gas prices have hit discretionary spending. The Composite at 51.7 was little changed, but the divergence implies Q2 GDP growth tracking near just 1% annualized.

PCE Inflation, Holiday-Shortened Trading, and the Confidence Test

With U.S. markets closed Monday May 25 for Memorial Day, the holiday-shortened week packs an outsized punch. The marquee event is April core PCE inflation on Thursday May 28 - the Fed's preferred inflation gauge, released alongside Q1 GDP's second estimate, durable goods, and initial jobless claims. After hot CPI (3.8%) and even hotter PPI (+1.4% MoM), markets will look at PCE to confirm or deny whether the inflation shock is broad-based. Consumer confidence (Tuesday), Costco earnings (Thursday after the close), and Chicago PMI (Friday) round out the calendar.

Tue May 26: Consumer Confidence & New Home Sales

The Conference Board's May Consumer Confidence Index releases at 10:00 AM ET. April printed at 92.8 (above 89.0 forecast), but the share of Americans calling a recession "very likely" has been climbing for four straight months. With University of Michigan sentiment also at a record low Friday on gas-price worries, this is a critical read. New home sales for April also release.

Wed May 27: Richmond Fed & Auctions

The Richmond Fed Manufacturing Survey provides a regional check on the surprisingly strong flash PMI. Treasury holds 5-year and 7-year note auctions: demand appetite at these duration buckets will tell us whether the bond market truly believes the worst of the rate scare is behind us.

Thu May 28: PCE Inflation, Q1 GDP, Durable Goods, Costco

The big one. April core PCE consensus is around 2.9-3.0% YoY (vs. 2.7% prior), with headline PCE expected near 3.4%. Q1 GDP second estimate (prior 2.0% advance) will incorporate new trade and inventory data. Durable goods orders for April: watch core capex. Costco Q3 FY26 earnings after the close: the bellwether for affluent and small-business consumer spending.

Fri May 29: Chicago PMI & Month-End Flows

Chicago PMI for May caps the data slate. Month-end rebalancing flows can amplify moves on the last trading day of May - watch for pension and quant flows. The NY Fed Staff Nowcast releases mid-afternoon.

With WTI at $96.60 (down 7.2% on the week), the 10-year back below 4.60%, and the S&P 500 at a record 7,473.47, markets are quietly betting that the inflation scare has peaked and an Iran framework deal will be signed before Memorial Day weekend ends. The risk: April PCE comes in HOT next Thursday, the Iran deal stalls, or Warsh's first public commentary lands hawkish. A move above 4.70% on the 10-year would likely cap the equity rally; a soft PCE below 2.8% core could ignite a final leg higher into June.