2026 Weekly Update

Market update

The S&P 500 closed the week at 7,398.93, +2.33% higher. The Dow Jones closed at 49,609.16, +0.22%, with the Nasdaq higher by +4.51%. The volatility index VIX closed the week at 17.19, up from 16.99. The Euro Stoxx 600 rose +0.10%.

The 10-year UST closed at 4.35%, down from 4.37% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 67bps. US Corporate Bond spreads: Investment Grade spreads narrowed -3bps at 82bps and High Yield spreads narrowed -3bps at 319bps. German 10-year Bunds yield closed at 3.00% down from 3.04% a week before. In Europe, Corporate Investment Grade spreads narrowed -1bp at 92bps and High Yield narrowed -5bps at 321bps.

The US Dollar Index (DXY) depreciated -0.26% last week and closed at 97.9. The Euro closed at 1.1787 (+0.56%); the Yen appreciated +0.21%, closing at 156.68 and the Swiss Franc appreciated +0.70%, closing at 0.7766. Gold closed at $4,715.25, appreciating +2.19%. Oil was lower, Brent closed at $101.29 (-6.36%) and WTI at $95.42 (-6.40%).

Macroeconomy

US jobs

The headline Establishment survey results for Apr were strong at +115k, down from +185k in March but solidly above the consensus forecast of +65k. Job gains occurred in health care, transportation and warehousing, and retail trade. Federal government employment continued to decline (since hitting a peak in Oct ’24, federal gov’t employment is down ~348k, or 11.5%). Employment in information continued to trend down in April (-13k); information employment is down by 342k, or 11%, since its most recent peak in November 2022. Revisions to the Establishment survey were modestly negative (employment in February and March combined is 16k lower than previously reported). The Household survey was negative, with the number of employed people falling 226k in Apr while the number of unemployed rose 134k, the “not in labor force” category climbed 188k, and the civilian labor force fell by 92k. The unemployment rate was inline with consensus at 4.3% and held steady vs. March. The participation rate ticked down 10bps sequentially to 61.8%. Wage growth was cooler than anticipated, coming in at +0.2% m-o-m (vs. expectations at +0.3%) and +3.6% y-o-y (vs. consensus at +3.8%), and wages were revised down for March (from +3.5% to +3.4%). The workweek length was a bit longer than anticipated at 34.3 hours (vs. the 34.2 hours expected). In other job-related releases, weekly initial jobless claims came in at 200k in the week ending May 2 (vs. 205k expected), which took the 4-week moving average down to a two-year low of 203.25k. Also, ADP’s latest report of private payrolls for April came in a bit shy of expectations at 109k (vs. 120k expected), the strongest monthly print since January 2025. The latest job openings for March fell by less than expected to 6.866m (vs. 6.85m expected). Meanwhile, the quits rate of those voluntarily leaving their jobs (and a good proxy for labor market tightness) ticked up to 2.0% (vs. 1.9% expected).

US Data

The NY Fed’s latest survey showed 1yr inflation expectations up to 3.64% in April (vs. 3.5% expected), which is the highest since September 2023. This week on Tuesday, the April CPI report is expected. Analysts expect headline inflation to rise by +0.6% m-o-m, moderating from March’s +0.9%, but still relatively firm. In contrast, the core measure is projected to accelerate to +0.3% m-o-m from +0.2%, suggesting underlying price pressures remain sticky even as energy-related effects fade. The y-o-y rates would move from 3.3% to 3.7% for the former and from 2.6% to 2.7% for the latter. The New York Fed’s Global Supply Chain Pressure Index (GSCPI) rose to 1.82 in April, up from 0.68 registered in March. It includes data from the Baltic Dry Index, airfreight costs, and PMI surveys and pointed towards more supply chain disruptions. The University of Michigan confidence fell to 48.2 (a record low) from 49.8 and with inflation expectations at 4.5% for 1 year and 3.4% for 5-to-10-year horizons, signaling persistent caution among consumers. Lastly, the Atlanta Fed’s GDPNow estimate for Q2 moved up two tenths to an annualized rate of +3.7%.

Fedspeak

The hawkish newsflow from last week continued with various Fed speakers. In particular, Boston Fed President Collins (a non-voter this year) said she agreed with the hawkish dissenters who didn’t want to include the easing bias in the statement. So that added to the sense there was wider skepticism around further rate cuts. We also heard from two of the hawkish dissenters. Cleveland Fed President Hammack said her own outlook was that “interest rates will be on hold for quite some time.” And Minneapolis President Kashkari said that “if the Strait of Hormuz is closed for an extended period of time, it may well be that the next move might need to be up in interest rates.”

US tariffs

The 10% global tariff currently in place was found to be unlawful by the US Court of International Trade. That’s the tariff the administration had imposed under the Trade Act of 1974, after the Supreme Court ruled against the previous IEEPA tariffs earlier this year. But for now at least, the Court of International Trade only blocked them from enforcing it against the companies that sued and Washington State. Also, President Trump set a deadline of July 4 for the EU to “deliver their side of the Deal”, or tariffs would be raised.

PMIs

The US services ISM for April was mixed-to-negative. The headline number ticked down 0.4 points m-o-m to 53.6, inline with consensus. On the demand/growth front, New Orders slumped a large 7.1 points m-o-m, but business activity/production rose 2 points (to 55.9) while employment ticked up 2.8 points (to 48) and new export orders rose 1.4 points (to 52.1). Prices did not rise further but remain very elevated (the Prices index held steady in Apr vs. Mar at 70.7, the same as March's figure and repeating its highest reading since October 2022). Fourteen industries reported growth in April, one more than in March, and the number reporting contraction remained at three. In Europe, Eurozone manufacturing PMI flat came at 52.2, with expansionary readings in France (52.8), Greece (52.4), Italy (52.1), Spain (51.7), and Germany (51.4). Eurozone Services PMI continued to contract, ending at 47.6 in April. Sub-50 readings were seen in Italy (49.8), Spain (47.9), Germany (46.9), and France (46.5). Switzerland had manufacturing PMI accelerated to 54.5, while services PMI decelerated to 54.8 for April. Asian manufacturing PMIs showed expansion in Taiwan (55.3), South Korea (53.6), Malaysia (51.6), and Vietnam (50.5), but contraction in Indonesia (49.1) and the Philippines (48.3). Taiwan, South Korea, and Malaysia all improved from the previous month. In China, the RatingDog Services PMI increased to 52.6 in April (52.0 expected), up from 52.1 in March, driven by stronger domestic demand and enhanced business confidence.

Global data

Swiss inflation accelerated to 0.6% y-o-y in April, the highest since December 2024, driven by energy and fuel prices. Core inflation remained subdued at 0.3% y-o-y, with the strong franc and low energy intensity mitigating impacts from further energy price rises. China trade data posted positive surprises in April, defying fears of oil shock. In USD terms, exports rose 14.1% y-o-y, significantly beating forecast at +8.4% and prior month’s +2.5%. Imports grew 25.3%, also surpassing forecast at +20.0%. Trade surplus reached $84.8 bn, exceeding forecast and prior month’s $51.1 bn. Hong Kong’s Q1 GDP grew 5.9% y-o-y, beating the 3.5% forecast and marking the strongest growth in five years. Imports (+29.9% y-o-y), exports (+23.8%), investment (+17.7%), and consumption (+5.0%) all contributed.

Global central banks

In Australia, the RBA hiked rates for a third meeting in a row to 4.35%. The decision came in a hawkish-leaning 8-1 vote, a much more decisive split than the 5-4 vote in March, though the RBA’s press release does suggest a degree of patience moving forward as “having raised the cash rate three times, monetary policy is well placed to respond to developments”. In Norway, Norges Bank raised deposit rates by 25bps to 4.25% and maintained its tightening bias. Although the macroeconomic outlook has not changed materially since March, there are ongoing concerns that elevated inflation may prompt firms and households to anticipate persistently high inflation. The central bank emphasized that a higher policy rate is necessary to bring inflation back to target within a reasonable time frame.

Highlights

On earnings

The Q1 2026 earnings season remains robust, with 89% of S&P 500 companies having reported results so far. Of these, 84% have delivered EPS above estimates, surpassing both the 5-year and 10-year averages. The index is now posting its highest earnings growth rate since Q4 2021, with both the percentage and magnitude of positive earnings surprises above recent norms. Communication Services leads the way, with a 53% earnings growth rate and standout results from Alphabet, Netflix, Meta Platforms, and Paramount Skydance, all reporting significant EPS beats. Last week, in Europe BMW shares rallied after solid Q1 margins, and Lufthansa’s results provided relief as the company maintained its guidance. In the US, AMD, Uber and MercadoLibre posted strong results, while Airbnb, HSBC and Coinbase reported results that fell short of expectations. Looking ahead, investors will be looking at upcoming results from Zurich Insurance, Constellation Energy, Siemens, Bayer, Alibaba, and Alstom next week. Other important reports will come later in the month from Nvidia on May 20 and Walmart on May 21.

On rates

US rates remained broadly stable last week, with 10-year Treasury yields ending nearly unchanged at 4.36% and 2-year yields slightly higher at 3.89%. The market digested the April jobs report and mixed survey data, but these had limited impact on rates. In the UK, we saw significant losses for the governing party, but as these results were widely anticipated, they had little effect on gilt yields, 10-year yields outperformed on Friday (-3.6bps) and were down -5.2bps over the week. In Europe, 10-year bund, OAT, and BTP yields all declined, supported by lower oil prices and expectations around central bank policy. ECB officials signaled a possible rate hike at the next meeting unless inflation shows clear improvement. In Japan, the 10-year government bond yield eased to 2.48%, reflecting the broader decline in global bond yields. Looking ahead, the focal point for the US will be tomorrow’s April CPI report, while in Europe, the ECB’s economic bulletin later in the week may offer additional context on inflation and growth.

What to watch

• Monday: US Existing Home Sales; South Korea Exports; China CPI and PPI
• Tuesday: US NFIB Small Business Optimism, ADP Employment, and CPI; Germany CPI and ZEW Survey
• Wednesday: US PPI; Eurozone Q1 GDP; France CPI
• Thursday: US Initial Jobless Claims and Retail Sales; UK Q1 GDP; Trump-Xi meeting (May 14th–15th)
• Friday: US Empire Manufacturing; Japan PPI; India Exports