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May 18, 2026
Good afternoon,
Markets
For the week ending 5/15/2026:
- The S&P 500 increased 0.1% to close at 7,408.50.
- The yield of the 10-year Treasury bond increased from 4.36% to 4.59%.
- Oil increased from $95.42 to $105.42.
- The CBOE Volatility Index (VIX) increased from 17.19 to 18.43.
- U.S. dollar currency exchange rates were:
- EUR/USD: 1.17 (USD stronger from a week ago)
- GBP/USD: 1.34 (USD stronger from a week ago)
- USD/JPY: 158.38 (USD stronger from a week ago)
Market Headlines
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Stocks Flatten Out: The S&P 500 narrowly secured its seventh consecutive weekly gain, rising just 0.13%, a sharp slowdown compared to the stronger advances of prior weeks. Meanwhile, both the Nasdaq and Dow posted modest weekly losses, signaling a pause in momentum across major indexes, as a steep end-of-week sell-off was driven by surging bond yields, hotter-than-expected inflation data, and escalating geopolitical concerns.
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Yields Spike: U.S. Treasury yields surged to their highest levels in over a year on Friday, driven by an intensifying bond market sell-off. The 10-year Treasury yield closed at 4.59%, its highest level since February 2025 and up from a yearly low of 4.017%. Meanwhile, the 30-year yield finished at 5.12%, it’s highest since 2007. This sharp rise in yields reflects persistent inflation concerns and growing expectations that interest rates may remain elevated for longer than previously anticipated.
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Hot Inflation Data: Tuesday’s Consumer Price Index (CPI) report showed that inflation rose at 3.8% year-over-year in April 2026, which exceeded economists’ expectations and is the highest level since May 2023. The increase was largely driven by a surge in energy prices, which rose roughly 17% year over year, led by a 28.4% jump in gasoline costs.
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Strong Earnings Season: As earnings season winds down, results continue to signal solid corporate momentum. S&P 500 companies are on track for approximately 11.4% revenue growth and roughly 28% earnings growth, the fastest pace since late 2021. More than 83% of companies have exceeded earnings expectations, driven largely by the AI infrastructure boom and strong profitability among mega-cap technology firms.
Key Takeaway
After beginning the year with expectations for multiple rate cuts from the Federal Reserve, investors are now reassessing the policy outlook. Futures markets have shifted significantly, with traders pricing in at least a 50% probability of a 25-basis-point rate hike by January 2027, according to the CME Group’s FedWatch Tool. The shift has been driven by persistent inflation and renewed energy pressures, as elevated oil prices tied to geopolitical tensions involving Iran continue to complicate the inflation outlook. However, recent data suggest inflation remains sticky even excluding energy, particularly in core services, reinforcing a “higher-for-longer” policy backdrop. The bond sell-off this week further reinforced expectations that monetary policy will need to remain restrictive for longer, as investors demanded higher yields amid inflation resilience and shifting rate expectations. Amid this uncertainty, there is the upcoming leadership transition within the Federal Reserve as Kevin Warsh is expected to succeed Jerome Powell as Chair in the coming weeks, and investors will certainly be watching for any shift in tone or policy signaling under new leadership. Overall, markets have clearly transitioned from a rate-cut narrative to a more cautious, data-dependent stance, increasing volatility across rates and risk assets.
The Week Ahead: May 18 – 22
- Monday: Housing market index
- Tuesday: Pending home sales
- Wednesday: April FOMC meeting minutes
- Thursday: Initial jobless claims, Housing starts
- Friday: Consumer Sentiment, U.S. leading economic indicators
Until next week,
Weller Financial Group
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