Updated 6/1/2026

Our Perspective on the Markets Last Week

Equity markets continued their impressive advance last week, extending what has become one of the strongest rallies in recent years. The price change of select U.S. indexes for the week was: S&P 500 (+1.43%), Dow Jones Industrial Average (+0.90%), and Nasdaq (+2.39%). The yield on the 10-year Treasury note fell 0.11 percentage points to 4.45%.

The gains marked the ninth consecutive positive week for the S&P 500 and continued an extraordinary trend in which the index has posted a positive return in every week of the second quarter. Considering the market entered April following a difficult first quarter and amid heightened concerns surrounding inflation, interest rates, and geopolitical tensions, the market's resilience has been remarkable.

Investor sentiment trended higher throughout much of the week as tensions in the Middle East appeared to ease. Reports suggesting progress toward extending the ceasefire between the United States and Iran helped ease concerns about disruptions to shipping through the Strait of Hormuz, pushing crude oil prices lower. The decline in oil prices alleviated some concerns about renewed inflationary pressures and contributed to a drop in Treasury yields, providing support for both stocks and bonds.

Technology and artificial intelligence-related companies once again led the advance. Strong earnings results and continued optimism surrounding AI spending helped fuel gains in growth-oriented sectors, allowing the Nasdaq to significantly outperform the broader market. While technology remained a leadership group, investor sentiment improved across much of the market.

Economic data provided a mixed backdrop. The Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) Index, rose 0.4% in April and 3.6% from a year earlier, while core PCE increased 0.3% on the month and 3.2% annually. Both measures accelerated from the prior month and reinforced concerns that inflation remains a risk. Under normal circumstances, the report would have weighed more heavily on investor sentiment. Instead, markets appeared more focused on easing energy prices, improving geopolitical conditions, and declining Treasury yields.

Looking Ahead

Investors will receive a broad update on the health of the economy this week, with labor market data, manufacturing activity, and service sector activity all in focus. The week culminates Friday with the May employment report, where economists expect job growth to moderate while the unemployment rate remains relatively stable.

Outside of economic data, developments involving Iran will remain a key focus for investors. Recent optimism surrounding a potential agreement helped ease concerns over energy supplies and inflation, contributing to lower oil prices and Treasury yields. Any signs of progress toward a more durable agreement could further support investor sentiment, while setbacks could quickly reignite concerns surrounding energy prices, inflation, and global economic growth.

The European Central Bank is also widely expected to lower interest rates on Thursday, but the market impact will be secondary to developments involving the U.S. economy and the Middle East.

Stay Informed. Receive weekly updates of our outlook on the markets in your inbox.

Probability of an interest rate change at next FOMC meeting:

DECREASE -25 bps
%
No Change
%
INCREASE +25 bps
%

Current Target Rate is 3.50% - 3.75%

Select Economic Data Releases

*Colored icon denotes a new data release.
Gross Domestic Product

The second estimate of Q1 GDP was revised down to show 1.6% annual growth in the first quarter, instead of 2% as previously reported.  The final revision to fourth quarter GDP showed growth of just 0.5%, reflecting a notable slowdown in economic momentum.  For the full year 2025, GDP grew by 2.1%.  U.S. GDP grew at a strong 4.4% annualized rate in the third quarter of 2025, marking the fastest pace of growth in about two years, led by solid consumer spending, exports, investment, and government outlays.  The final estimate of Q2 GDP came in at an annualized rate of 3.8%, well above the initial 3.0% estimate.  The final revision showed gross domestic product shrank at a revised -0.5% annual rate in the first quarter.  More than the previous revision of -0.2%.  The final revision of Q4 2024 GDP was raised a tenth of a percent to a 2.4% annualized pace.  Q3 GDP showed the U.S. economy expanded at a frothy 3.1% annual pace in the third quarter, revised up from 2.8%.  Q2 GDP grew at a 3.0% annual pace.  Q1 2024GDP grew at a 1.4% pace due largely to much slower growth in consumer spending.  The final revision of Q4 GDP rose to 3.4%.  U.S. GDP grew at 4.9% annual pace in the third quarter.  

Employment Data

The May jobs report comes this week.  The April employment report came in stronger than expected, with nonfarm payrolls increasing by 115K and the unemployment rate holding steady at 4.3%.  In addition, March payrolls were revised higher, reinforcing the view that the labor market remains resilient despite signs of broader economic moderation.  The March nonfarm job gains were revised up to 185K from 178K.  The unemployment rate held near 4.3%, suggesting the labor market remains stable overall.  The U.S. labor market showed modest weakness in February, with nonfarm payrolls declining by 92K jobs, while the unemployment rate edged up to 4.4%. Despite the softer headline, average hourly earnings rose 0.4% for the month and 3.8% from a year earlier, indicating wage growth remains relatively firm.  The U.S. added 130K jobs in January, while the unemployment rate held steady at 4.3%, indicating continued but moderate labor market growth.  The economy added approximately 50K jobs in December, noticeably less than the anticipated addition of 60K, but the unemployment rate unexpectedly decreased to 4.4%, suggesting that while hiring has slowed, labor conditions remain relatively stable.  The November U.S. nonfarm payrolls report showed a modest rebound in hiring with about 64K jobs added, beating expectations after an unusually large October decline of -105K, primarily driven by steep federal government job losses tied to the prolonged government shutdown.  The unemployment rate ticked up to around 4.6%, its highest in several years, signaling continued cooling in the labor market. The September nonfarm payrolls increased by 119K, while the unemployment rate rose to 4.4%, signaling modest job gains amid a cooling labor market.  Employers added a mere 22K jobs in August.  July nonfarm payrolls rose just 73K while June and May were revised significantly lower.  June payrolls were lowered to a paltry 14K from 147K and May nonfarm payrolls came down to just 19K.  April nonfarm payrolls grew by 147k. The unemployment rate held steady at 4.2%, persisting in its narrow 4.0–4.2% range—a clear indicator of a slowing, yet resilient labor market.  The U.S. added 193K jobs in March, but the unemployment rate ticked higher to 4.2%.  U.S. nonfarm payrolls increased by 151K in February and the unemployment rate ticked up to 4.1%.  Nonfarm payrolls grew by 143K in January, a significant drop from the upwardly revised December gains.  Although it was shy of the average monthly gain of 166K observed throughout 2024, the unemployment rate edged down to 4.0%.  The U.S. economy added 307K jobs in December, blowing past analysts' expectations of 160K new jobs. 

Retail Data

Retail receipts rose by a seasonally adjusted 0.5% in April, but mostly due to increased spending on gas.  Retail sales surged 1.7% in March 2026, exceeding forecasts, driven heavily by a 15.5% spike in gasoline prices due to the Iran conflict.  Retail sales rose modestly in February, increasing approximately 0.6% and coming in generally in line with expectations after falling -0.2% in January.  U.S. retail sales were flat in December (0.0% month-over-month), missing expectations and signaling softer consumer demand as households pulled back on big-ticket purchases. Year-over-year sales were up about 2.4%.  November retail sales rose about 0.6 % month-over-month, rebounding from a revised dip in October and topping forecasts.  Retail sales in the US flattened in October from September 2025, following a downwardly revised 0.1% rise in the previous period.  August retail sales rose 0.6% from July, exceeding expectations and underscoring consumer resilience.  Omitting autos and gasoline sales, a better way to measure trends in retail spending, rose an even stronger 0.7%.  July retail sales rose 0.5%, matching expectations and underscoring steady consumer demand.  June retail sales rose 0.6% month-over-month and 3.9% year-over-year, reversing two months of declines.  The May retail sales report showed a sharp -0.9% decline as sales of autos slowed by 3.5%.  Retail sales rose a scant 0.1% in April, matching the Wall Street forecast as Americans likely reduced their spending in response to tariffs.  Retail sales in the U.S. jumped 1.7% in March as shoppers sought to buy larger ticket items such as cars before tariffs could raise prices.  The February retail sales increase of 0.2% was les than anticipated, but a 1% increase in receipts from the "control group" provided some reassurance that the consumer is still solid.  Retail sales fell in January by -0.9% after consumers took a breather from holiday shopping season and a severe cold snap kept people indoors.  

Housing Data

New home sales fell 6.9% in April to an annualized rate of 635K units, reflecting some cooling in housing demand as higher mortgage rates and affordability challenges continued to weigh on buyers.  Existing-home sales increased by 0.2% in April.  Despite higher mortgage rates, new home sales rose in March to a seasonally adjusted annual rate of 682K, increasing 7.4% from the prior month and slightly above year-ago levels.  New home sales rose 1.6% in February to an annualized pace of roughly ~662K units, while pending home sales declined about -0.8%.   Existing-home sales increased by 1.7% in February 2026. For the month, sales rose in the Midwest, South and West, but fell in the Northeast.  Year-over-year sales rose in the South and declined in the Northeast, Midwest and West.  December pending home sales report showed a notable pullback in the U.S. housing market, with the National Association of Realtors’ Pending Home Sales Index sliding 9.3% month-over-month to an index level of 71.8, the largest drop in contract activity since early 2020, and down about 3% from a year ago. New single-family home sales were essentially flat in October at about 737K units annualized, just a touch below September’s 738K but still roughly 19% higher than a year ago, suggesting steady builder demand even as closings level off.  Existing-home sales climbed about 5% to roughly 4.35M units, highlighting stronger resale market activity alongside cautious new construction. In August, new single-family home sales surged 20.5% month-over-month to an annualized pace of 800K units, reflecting a 15.4% increase year over year.  Meanwhile, existing home sales dipped slightly by -0.2% from July to a 4M unit annual rate, though they were up 1.8% from a year earlier.  New home sales in July rose to a slightly lower than anticipated 664K annualized pace and well below the July 2024 pace of 710K.  Existing-home sales rose slightly to a 4.01M annual pace in July, but remained at a relatively low level as the median price of $422,400 for an existing home still hovers near the all-time highs.  U.S. housing starts jumped by 5.2% to a seasonally adjusted annual rate of 1.43M units—boosted by increases in both single‑family and especially multifamily construction—while building permits fell by -2.8% to 1.35M units, signaling a potential slowdown in future building activity.  Sales of new single‑family homes rose modestly by 0.6% to an annualized rate of 627K units, but missed expectations of ~650K. Compared to a year ago, sales were down -6.6%.  Resales of existing homes fell -2.7% month‑over‑month to 3.93M units, the lowest pace since September 2024 and below forecasts.  

Leading Indicators

The Conference Board’s Leading Economic Index rose slightly by 0.1% in April 2026 to 97.4 (2016=100), following a 0.6% decline in March.  The U.S. Leading Economic Index (LEI) fell by -0.2% in December, following the -0.3% decline in November.  The U.S. Leading Economic Index (LEI) fell by -0.5% in August.  The Conference Board Leading Economic Index (LEI) for the US was revised up to a 0.1% increase in July 2025 to 98.7 (2016=100), after declining by -0.3% in June.  The LEI fell by -2.7% over the six months between January and July 2025, a faster rate of decline than its –1.0% contraction over the previous six-month period (July 2024 to January 2025).  The Conference Board Leading Economic Index® (LEI) for the US ticked down by -0.1% in May 2025 to 99.0 (2016=100), after declining by -1.4% in April (revised downward from –1.0% originally reported).  The Leading Economic Index (LEI) for the U.S. declined by -0.7% in March to 100.5 (2016=100). The LEI in February fell by -0.2% after an upward revision in January from -0.3% to -0.2%.  The Leading Economic Indicators index rose 0.1% in December 2024 (upwardly revised from an initially estimated decline of 0.1%).  November LEI was revised up +0.4% in November. The LEI declined by -1.3% over the second half of 2024, slightly less than its -1.7% decline over the first half of 2024.  The leading index dropped -0.3% in October, largely because of higher jobless claims, fewer building permits and a decline in manufacturing orders.  The leading indicators of the U.S. economy fell -0.5% in September because of weakness in a few key industries such as housing and manufacturing, but not enough to suggest any sign of major trouble.  The leading indicators for the U.S. economy dropped -0.2% in August, the sixth consecutive decline.  The leading index for the economy fell -0.6% in July, the fifth straight monthly decline.  

Inflation

The PCE Index, rose 0.4% in April, pushing the annual inflation rate to 3.6%, the highest level in nearly three years. The report reinforced concerns that inflation remains a significant risk and may be trending higher again.  U.S. inflation rate leaped to a nearly three-year high of 3.8% in April and the producer price index jumped 1.4%, mostly due to higher oil prices.  The Federal Reserve’s preferred inflation measure, the core PCE index, rose approximately 0.3% in March and 3.5% year-over-year, indicating that inflation remains elevated and above the Fed’s 2.0% target.  Producer prices rose 0.5% in March due to surging oil prices tied to the Iran war, but aside from energy, the increases in the cost of other goods and services were surprisingly tame.  March inflation data was mixed but remained elevated, with core PCE rising 0.4% month-over-month and CPI increasing 0.9% for the month. The Producer Price Index report showed wholesale prices rising 0.6% in February, a stronger-than-expected increase that reinforced concerns that inflation progress may remain uneven. The February Consumer Price Index (CPI) rose 0.4% on the month and 3.2% from a year earlier, while core CPI increased 0.3% month-over-month and 3.8% year-over-year, indicating inflation pressures remain persistent.  Similarly, the latest Personal Consumption Expenditures (PCE) price index showed headline prices rising 0.3% for the month and 2.5% year-over-year, with core PCE up 0.4% on the month and 2.8% annually, reinforcing expectations that Federal Reserve rate cuts may be more gradual.  The January Producer Price Index rose 0.5% month over month, above the 0.3% consensus estimate, signaling that pipeline inflation pressures remain somewhat sticky.  The headline PCE index rose 0.3% for December and 2.5% year-over-year, while core PCE increased 0.4% on the month and 2.8% from a year earlier.  U.S. consumer prices rose 0.2% in January, while annual inflation slowed to 2.4% year-over-year from 2.7%, marking continued easing in inflation pressures. Core CPI, which excludes food and energy, increased 0.3% for the month and 2.5% annually, with shelter remaining the primary driver of price gains.  

Important Disclosures:  The material presented is general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purpose. Opinions and estimates offered constitute Investment Management Corporation’s judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. Some of the information provided has been obtained from third party sources believed to be reliable, but no warranty of accuracy is given. IMC has not taken into account the investment objectives, financial situation or particular needs of any individual investor. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor's financial situation or risk tolerance. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary. The material presented does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products.