In the last two weeks, markets experienced notable gains with the S&P 500 and Nasdaq posting their largest monthly increases in years, amid robust earnings from major tech companies. Geopolitical tensions in the Middle East contributed to record U.S. crude oil exports, while the Federal Reserve maintained its interest rate stance with a historically high level of internal dissent. Let’s dive in!
- Stock Market Gains: The S&P 500 posted its biggest monthly gain since November 2020, while the Nasdaq’s largest since April 2020, driven by solid earnings and strong economic growth despite geopolitical tensions and oil price volatility.
- Inflation and GDP: Core inflation rose 0.3% in March, pushing the annual rate to 3.2%, the highest since November 2023, driven by higher energy prices. Q1 GDP grew 2% annualized, below estimates, while jobless claims hit a historic low, reflecting a mixed economic environment.
- Big Tech Earnings: The Magnificent Seven tech giants (Alphabet, Apple, Amazon, Microsoft, Meta, Nvidia, Tesla) reported strong earnings driven by AI growth, pushing the S&P 500 and Nasdaq to record highs. However, investors are beginning to differentiate among winners, favoring cash-generating firms like Alphabet and Amazon while pressuring higher-spending companies such as Meta and Microsoft.
- Interest Rate Hold: The Fed held interest rates steady at 3.5%-3.75% with a rare 8-4 split, marking the first four-member dissent since October 1992. Officials disagreed on signaling future rate cuts amid persistent inflation and economic uncertainty.
- Oil Exports Surge: The Port of Corpus Christi has become a critical hub for U.S. crude oil exports amid the Iran war, with exports rising over 30% to 5.2 million barrels per day in April. Ship traffic and tanker volumes have doubled, reflecting rerouted global supply chains due to Strait of Hormuz blockades.
- Fed Chair Powell’s Tenure: Jerome Powell’s eight years as Fed chair saw historic volatility, including COVID and inflation shocks, yet markets rallied broadly. The S&P 500 gained 14.7% annualized, with positive returns across stocks, bonds, commodities, and gold despite several sharp selloffs. See the graph below for the exact numbers:
- AI Spending Surge: Analysts project AI-related capital expenditures to exceed $1 trillion in 2027, driven by strong cloud demand and infrastructure buildouts. Despite high spending, revenue growth and backlog expansions signal positive ROI for major tech firms like Alphabet and Amazon.
- Medicare Advantage Changes: Millions face plan losses or network changes as insurers and providers end contracts, causing out-of-network care and higher costs. The Centers for Medicare & Medicaid Services dropped a proposed rule that would ease midyear plan switches for affected enrollees, increasing challenges in navigating coverage.
- Senate Prediction Market Ban: The U.S. Senate unanimously passed a rule banning senators from trading on prediction markets due to concerns over insider trading and sensitive event contracts. This move follows recent insider trading cases involving political candidates and military personnel on platforms like Kalshi and Polymarket.
Over the next two weeks, markets will focus on key economic data releases including inflation readings, retail sales, consumer sentiment, and broader labor market data, all of which will help shape expectations for future Fed policy. Geopolitically, attention will remain on U.S. trade negotiations and tensions with Iran, as risks of disruption in the Strait of Hormuz could continue to drive oil price volatility.
Footnotes
SFM Market Commentary: 5/8/26
In the last two weeks, markets experienced notable gains with the S&P 500 and Nasdaq posting their largest monthly increases in years, amid robust earnings from major tech companies. Geopolitical tensions in the Middle East contributed to record U.S. crude oil exports, while the Federal Reserve maintained its interest rate stance with a historically high level of internal dissent. Let’s dive in!
Over the next two weeks, markets will focus on key economic data releases including inflation readings, retail sales, consumer sentiment, and broader labor market data, all of which will help shape expectations for future Fed policy. Geopolitically, attention will remain on U.S. trade negotiations and tensions with Iran, as risks of disruption in the Strait of Hormuz could continue to drive oil price volatility.
Footnotes