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Good Morning!
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Now let’s break down what actually moved markets this past week and what to watch next.
Market Recap
This was one of the most consequential weeks of the year, packed with a Federal Reserve decision, GDP data, the biggest wave of tech earnings of the season, and a major new development in the energy market. Despite all the uncertainty, stocks closed the week at record highs and capped their best month since 2020.
The oil story dominated the middle of the week and cannot be overstated. On Wednesday, Trump said he would maintain the U.S. naval blockade of Iran until the country agreed to a nuclear deal, sending oil surging more than 6% in a single session. By Thursday, oil briefly touched its highest price in four years, with U.S. gasoline hitting a four-year high of $4.30 a gallon. This renewed spike rattled bond markets and put fresh pressure on the inflation outlook, with economists warning that a prolonged disruption to oil supply could eventually tip the global economy toward recession.
Adding to the energy story, the UAE announced this week it was leaving OPEC after decades of membership, citing national interests. However, analysts noted the exit is unlikely to have an immediate impact on prices since the UAE's exports are currently constrained by Iran's control of the Strait of Hormuz regardless. The bigger implication is longer term: if the strait eventually reopens, the UAE would be free to ramp production significantly, potentially adding meaningful supply to global markets.
The Federal Reserve met Wednesday and held rates steady for the third consecutive meeting, a decision that was fully expected. What surprised markets was the level of division inside the committee, with four members dissenting, the most since 1992. Three of those dissenters opposed any easing language in the statement, signaling they are not comfortable with even the hint of future rate cuts given where inflation and energy prices stand. This was also Powell's final meeting as chair. In his closing remarks he congratulated his successor and said the Fed's independence would remain its guiding principle going forward. Kevin Warsh is now on track to take over as Fed chair in mid-May, marking the first leadership change at the central bank in nearly a decade.
Thursday brought the GDP report markets had been waiting on. The U.S. economy grew at an annualized rate of 2% in the first quarter, a solid rebound from the near-stall at the end of 2025, driven by a surge in AI-related business investment. Consumer spending slowed but remained solid, pointing to an economy still expanding despite the pressure from elevated energy costs. The GDP number pushed back firmly against stagflation fears. Growth is not collapsing.
Tech earnings were the other dominant story. The results drew a sharp line in the market: companies whose AI investments are clearly generating revenue were rewarded, while those seen as overspending without sufficient near-term returns were punished. Overall, S&P 500 first-quarter earnings are now tracking 14% growth year-over-year, up from estimates of roughly 12% at the end of March. By Friday, stocks extended the rally on strong earnings and news that a new Iranian peace proposal had been sent through Pakistani mediators, pushing oil lower and sending the S&P 500 and Nasdaq to fresh record closes to end the week.
What's Coming Next Week
The April jobs report is the biggest event. The labor market has held up well through the conflict, but investors will be watching closely for any signs of softening as high energy costs and macro uncertainty filter through to hiring and wages.
More major semiconductor and AI-focused company earnings follow, keeping the debate over AI spending and returns front and center. Markets have made clear this earnings season that they will reward monetization and punish excess spending without results.
The Iran situation and the fate of the peace proposal remain the biggest wildcard. Trump signaled he was not satisfied with Iran's latest offer, trimming oil's losses Friday afternoon. Any credible progress toward ending the conflict would send oil meaningfully lower, ease inflation pressure, and give the incoming Fed chair room to begin shifting policy. Any breakdown does the opposite.
The bottom line: the economy is growing, earnings are strong, and markets are at record highs. But oil is still dangerously elevated, inflation is sticky, and the Fed is heading into a leadership transition deeply divided. The next few weeks will be critical.
We will continue monitoring these developments closely and keep you updated with new opportunities as they emerge.
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SmallCapStocks Team
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