In the last two weeks, U.S. economic indicators showed mixed signals with core inflation steady at 3.3% and manufacturing activity reaching a four-year high, while jobless claims edged slightly higher. Geopolitical developments included progress on a UAE pipeline bypassing the Strait of Hormuz and optimism around U.S.-Iran ceasefire talks impacting oil prices. Let’s dive in!
Labor Market Update: Initial claims for unemployment benefits increased by 5,000 to 215,000 for the week ended May 23, remaining within this year’s typical range. Continuing claims rose to 1.786 million, reflecting stable hiring despite geopolitical tensions impacting inflation.
Inflation Update: April’s personal consumption expenditures price index rose 0.4%, with a 12-month inflation rate of 3.8%, the highest since May 2023. Core inflation increased 0.2% monthly and 3.3% annually, in line with expectations.
Strong Manufacturing Activity: U.S. manufacturing PMI rose to 55.3 in May, the highest since May 2022, driven by increased inventories amid supply chain concerns and rising input prices due to the U.S.-Iran conflict. Higher costs signal accelerating inflation, with potential impacts on economic growth.
UAE Oil Pipeline: The UAE’s Abu Dhabi National Oil Co. has completed nearly 50% of a pipeline bypassing the Strait of Hormuz to double export capacity, aiming for 2027 operation. This move mitigates supply risks amid the ongoing Iran blockade disrupting global oil flows.
GDP Growth Revised: U.S. first-quarter GDP growth was revised down to 1.6% from 2.0%, reflecting weaker consumer spending and inventory investment. Economic momentum is expected to slow in the second quarter due to inflation pressures linked to the Iran conflict.
Fed Inflation Focus: Federal Reserve leaders Neel Kashkari and Lisa Cook emphasized inflation containment as a priority amid elevated consumer prices and global pressures. Both suggest the Fed may hold or raise interest rates depending on inflation trends and economic developments, balancing price stability with labor market conditions.
Inflation Expectations: Long-term inflation expectations hit a 19-year high, matching levels last seen before the 2008 financial crisis. Maintaining a long-term investment horizon remains important amid these evolving market conditions.
Oil Price Decline: Global oil prices have fallen around 20% from 2026 highs due to optimism over a potential U.S.-Iran ceasefire that could reopen shipping through the Strait of Hormuz, though supply disruptions and regional tensions continue to limit recovery.
Homebuying Affordability:Homebuying affordability improved slightly in April due to lower mortgage rates and rising incomes, with 33% of listings affordable versus 29% last year. Affordability improved in 34 of 50 major U.S. metros, led by Chicago, Oakland, and Dallas.
Over the next two weeks, investors will closely monitor key economic reports, including inflation and retail sales data, along with the Federal Reserve’s June meeting and updated economic projections for clues about the future path of interest rates. Markets will also remain focused on tensions involving Iran and the broader Middle East, as developments that affect energy prices could have implications for inflation and economic growth.
SFM Market Commentary: 6/5/26
In the last two weeks, U.S. economic indicators showed mixed signals with core inflation steady at 3.3% and manufacturing activity reaching a four-year high, while jobless claims edged slightly higher. Geopolitical developments included progress on a UAE pipeline bypassing the Strait of Hormuz and optimism around U.S.-Iran ceasefire talks impacting oil prices. Let’s dive in!
Over the next two weeks, investors will closely monitor key economic reports, including inflation and retail sales data, along with the Federal Reserve’s June meeting and updated economic projections for clues about the future path of interest rates. Markets will also remain focused on tensions involving Iran and the broader Middle East, as developments that affect energy prices could have implications for inflation and economic growth.
Footnotes