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Good Morning!
Before we jump in, a quick reminder that we have new stock alerts coming next week. Keep an eye on your inbox.
Now let’s break down what actually moved markets this past week and what to watch next.
Market Recap
Stocks closed the week at fresh record highs, extending what is now a six-week winning streak for both the S&P 500 and Nasdaq. The Nasdaq led all major indexes with an impressive weekly gain, while the Dow trailed the pack with only a marginal advance.
The Middle East situation continued to dominate the macro backdrop, with oil swinging sharply in both directions as peace talks with Iran moved from hopeful to uncertain and back again. Midweek optimism around a potential framework agreement sent oil tumbling and stocks surging, offering a glimpse of what a resolution could mean for energy markets and inflation. By Friday that optimism had faded, leaving oil elevated and the situation unresolved heading into the weekend. The core tension for investors remains unchanged: diplomatic progress is being made in fits and starts, but energy markets have not healed, and until oil stabilizes durably lower, inflation pressure is not going away.
The consumer is feeling the pain at the pump. National average retail gasoline prices rose to their highest level since 2022 this week. Surging prices sent the University of Michigan's Consumer Sentiment index to a new all-time low, well below what economists had expected.
Tech earnings were the dominant market story this week and drew a clear line between companies monetizing AI and those still spending without near-term results to show for it. Technology and communication services were the clear winners within the S&P 500 on the week, while energy and utilities were the biggest underperformers. The market has made its position clear this earnings season: it will reward AI monetization and punish excess spending without results.
The jobs report Friday came in far stronger than feared. Nonfarm payrolls rose well above expectations in April, marking the first back-to-back monthly gain in nearly a year. The unemployment rate held steady, with gains led by health care, transportation and warehousing, and retail trade. The number pushed back firmly against recession fears. The labor market is not cracking.
What's Coming Next Week
Next week is short on major earnings but loaded with events that will set the tone for the summer.
The April Consumer Price Index drops Tuesday, May 12. Expectations point to the highest headline inflation reading since September 2023, driven by surging energy costs that have been filtering through to consumers all spring. Any upside surprise would put immediate pressure on rate expectations and bonds. A cooler reading would give stocks further room to run.
The Fed leadership transition is the other major event. Warsh's confirmation vote is expected this week ahead of Powell's term expiring May 15, which would allow Warsh to take the helm at the Fed's June meeting. Markets will be watching closely for any early signals on how the new chair intends to approach rates as he inherits a divided committee and an inflation picture that has not fully healed.
The long-awaited U.S.-China Summit is also scheduled to take place next week, a meeting markets have been anticipating as a potential catalyst for trade clarity.
Oil and the Iran peace process remain the wildcard underneath all of it. Any credible progress toward a deal would ease energy prices, cool inflation, and give the incoming Fed chair breathing room. A breakdown does the opposite.
The bottom line: the labor market is holding up, earnings are strong, and markets are at record highs. But inflation is sticky, oil is far from solved, and next week's CPI report lands right as a new Fed chair takes the reins. 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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See you soon!
SmallCapStocks Team
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