Weekly Market Recap: Markets Hold Record Highs as AI Strength Meets Oil and Rate Pressure

Market Overview

U.S. equities held up well despite a tougher macro backdrop, with the S&P 500 gaining 0.17% for the week, reaching a fresh record high, and extending its winning streak to seven weeks. The Nasdaq slipped 0.06%, the Dow declined 0.11%, and small caps lagged sharply as the Russell 2000 fell 2.34%. Growth outperformed value, supported by continued enthusiasm around artificial intelligence, strong moves in select technology names, and optimism around potential trade progress with China.

Sector leadership was narrow. Energy surged 7.0% as crude prices jumped, while consumer staples, technology, and health care also finished higher. Consumer discretionary was the weakest sector, falling 3.0%, pressured by rising oil prices and signs of consumer strain. International markets underperformed, with MSCI EAFE down 1.53% and MSCI EM lower by 2.45%, weighed down by a stronger U.S. dollar, rising global rates, and profit-taking across parts of Asia following the Trump-Xi summit.

Commodities were led by crude oil, with WTI settling at $105.42 and Brent nearing $110 as tensions around the Strait of Hormuz remained unresolved. Gold and silver weakened under pressure from a stronger dollar and higher rate expectations, while copper held up as AI-related investment continued to support demand.

Federal Reserve Insights and Economic Roundup

Bond markets sold off as yields moved higher across the curve. The 10-year Treasury yield rose to 4.59%, up from 4.38% the prior week, while the 2-year yield climbed to 4.09% and the 30-year yield reached 5.12%. Core bonds fell 1.14%, investment-grade corporates declined 1.04%, municipals slipped 0.59%, and high yield lost 0.49%.

Inflation remains the central issue for the Federal Reserve. April CPI rose 0.6% month over month, pushing the annual pace to 3.8% from 3.3% in March. Services inflation also reaccelerated, with “supercore” inflation rising to 3.4% year over year, driven largely by medical care services. With inflation proving stickier than investors expected earlier this year, the Fed is likely to remain on hold over the next two quarters.

High yield credit continues to look resilient but expensive. Default rates are improving, distressed exchanges are easing, and the high yield index has become higher quality, with BB-rated securities now representing more than 56% of the market. Still, spreads remain historically tight, leaving limited room for further upside without a stronger economic backdrop.

The Week Ahead

Monday: Markets will watch services activity, housing sentiment, and TIC capital flows.
Tuesday: ADP employment data and pending home sales will offer labor and housing updates.
Wednesday: Mortgage applications and FOMC minutes will be in focus.
Thursday: Jobless claims, housing data, regional manufacturing, and PMIs will guide sentiment.
Friday: Consumer sentiment, Kansas City Fed services activity, and economic survey data close the week.