Resilient growth meets higher for longer rates

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Last week
Equities moved higher as stronger-than-expected labor data reinforced confidence in U.S. growth. The Nasdaq Composite rose 1.7%, marking its 11th record close of 2026, while the S&P 500 gained 2.36% to a fresh high. Both indexes extended their rally to a sixth consecutive weekly gain, while the Dow was largely unchanged.

April nonfarm payrolls increased by 115,000, well above expectations of roughly 55,000, and the unemployment rate held at 4.3%. Treasury yields moved higher in response, with the 10-year ending the week at 4.38% as markets further scaled back expectations for near-term Federal Reserve rate cuts.

Hiring remained concentrated in healthcare, retail, and transportation. At the same time, broader labor slack showed early signs of softening, with the U-6 underemployment rate rising to 8.2%. Consumer sentiment fell toward record lows as elevated gasoline prices continued to weigh on households.

Meanwhile, Brent crude declined 7% to around $101 per barrel after President Donald Trump signaled the Iran ceasefire remained in place despite renewed clashes, supporting expectations for a broader agreement. With the labor market giving the Fed room to remain on hold and inflation drifting higher, market attention has shifted to incoming price data. The broader backdrop continues to point toward a higher-for-longer rate environment.

This week
The week begins with housing data on Monday, where existing home sales are expected to rise modestly to 4.06 million from 3.98 million, suggesting tentative stabilization after recent softness.

Beginning on Tuesday, inflation and retail sales data should provide a clearer view of whether inflation is stabilizing and how resilient the consumer remains in the face of elevated costs. On Tuesday, April CPI is expected to show a mixed picture, with core CPI easing to 0.3% month over month from 0.4% while holding steady at 2.6% year over year. Headline CPI is projected to moderate to 0.5% month over month from 0.6%, while the year-over-year rate rises to 3.6% from 3.4%. Producer price data follows Wednesday, with PPI expected to increase 0.4% month over month, slightly below the prior 0.5% pace, offering an additional read on pipeline inflation pressures.

Attention then shifts to the consumer on Thursday. Retail sales are expected to rise 0.4% month over month, slowing from the prior 1.7% gain and pointing to some moderation in spending momentum.

Beyond the data, markets will focus on geopolitical and corporate developments. A high-level U.S.-China trade meeting scheduled for May 13 to 14 between President Trump and President Xi Jinping will be a key focal point after being delayed by the Iran conflict, with potential implications for technology and industrial sectors.

At the same time, ongoing military tensions in the Strait of Hormuz present continued risks to global energy markets. Shipping disruptions and rising war insurance premiums are contributing to volatility in Brent crude and energy equities.

The earnings calendar will also draw attention, highlighted by Cisco Systems as the sole Dow component reporting and Applied Materials as a key barometer for semiconductor and AI demand, alongside results from Monday.com, Robinhood, JD.com, and Alibaba. With equities at record highs, markets are likely to respond most sharply to forward guidance, particularly around AI investment and consumer demand.