Wealth Management Resources

Weekly Market Update

May 18, 2026

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Key areas of focus

This week features the March FOMC meeting minutes, the Philly Fed business sentiment survey, the University of Michigan consumer sentiment index, and a batch of housing data. Earnings season is largely in the rearview, but there are still some notable names reporting this week such as Nvidia after the close on Wednesday, along with big box retailers like Wal-Mart, Target, Home Depot, and Lowe’s among others.
The Senate approved the nomination of Kevin Warsh as Federal Reserve chair on Wednesday, replacing Jerome Powell after eight years leading the central bank. Warsh's first meeting as chair is set for June 16–17, with Powell retaining his seat as a Fed governor for now.
Inflation data delivered a surprise last week. CPI showed prices rising at a 3.8% annual rate in April, the highest since May 2023, while PPI surged to 6.0% annually, the hottest reading since December 2022. Taken together, the reports reduced confidence that inflation is on a smooth path lower, reinforcing the higher-for-longer rates narrative and leaving little room for near-term policy easing.

Week in review

Markets navigated a challenging macro backdrop last week, with Brent crude back near $110/bbl, 10-year Treasury yields climbing to near 4.60% (a one-year high), and inflation pressures re-accelerating. Monday opened on a constructive note, supported by broad sector strength despite uncertainty around a potential US-Iran ceasefire. Existing home sales came in roughly in line with expectations, with supply elevated at its highest level since 2016. The tone shifted meaningfully Tuesday and Wednesday as April CPI and PPI both came in hotter-than-expected, with the latter posting its largest monthly gain since March 2022, driven by energy and tariff-sensitive categories. Despite the inflation headwinds, consumer spending remained resilient. Retail sales rose for a third consecutive month. Weekly jobless claims rose but remained historically low, suggesting gradual normalization rather than material weakening. On Friday, industrial production rebounded sharply and the Empire manufacturing index surged to a multi-year high of 19.6, but equities sold off decisively, ending the week relatively flat.

Spotlight

Markets entered the year positioned for a continuation of the Fed's rate normalization cycle, with probabilities of at least one cut by year-end peaking at 96.6% on February 13 per the CME FedWatch tool, just before tensions in the Middle East escalated. That tone shifted meaningfully after 11 weeks of a blocked Strait of Hormuz and a subsequent energy crisis that is being driven by an oil supply shock. The impact is now manifesting itself in the data with both April CPI and PPI coming in hotter-than-expected last week. The shift has been dramatic. As of Friday, the probability of a cut by year-end had collapsed to just 0.4%, while the chance of at least one hike rose to 48.7%, with even 9.9% odds of two hikes priced in. This arrives at a particularly consequential moment, as Kevin Warsh was just confirmed as the next Fed chair. Trump has been vocal in his preference for cuts, but the data is currently arguing against them, leaving Warsh caught in the middle. Please refer to our latest Market Bulletin for our thoughts on Kevin Warsh’s confirmation.